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Us 59, Washington 23, America 20, Tom Cole 9, United States 8, Mr. Hoyer 8, Obama 7, Boehner 7, John Boehner 6, Bob 6, Tom Davis 6, Bowles 5, Virginia 5, Indiana 5, Chris Van Hollen 5, Jack Brooks 4, Al 4, Margaret 4, Tim Pawlenty 4, John 4,
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  CSPAN    Capitol Hill Hearings    News/Business.  

    December 5, 2012
    8:00 - 1:00am EST  

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clifton truman daniel will discuss the inspiration of his trip on sunday on c-span 3. >> over the next several hours we will show you some of today's events regarding the unless congress acts -- first, a bloomberg government former members of both parties said negotiators should be able to reach an agreement. in an hour, president obama speaks to ceo's at the business roundtable, followed by news conferences with house speaker john boehner and minority leader nancy pelosi. >> the supreme court will look at what was passed in 2008 by a majority of six-three, i believe, and they will say that is precedent. indiana had a voter i.d. -- >> they decided on the indiana
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case, it was constitutional for them to establish id they did not say all of that was subsequently -- >> they talked about indiana. you misrepresented what i said. the supreme court is the law of the land. >> when i hear these accusations that black people voter i.d. loss disproportionately affect minorities -- implies to me that somehow we have something missing in our brain. as -- if white americans can get id to vote and go through all the processes to follow the laws, what are you telling black people? that somehow they are not good enough? that is what bothers me about a lot of the rhetoric coming from democrats and the left. we always have to make -- there
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has to be a special mass when we deal with minorities because they are too feeble minded. we really need to make concessions for them because they cannot follow the rules like everybody else. when you treat people like victims, i do not think they want to ask bair. wright, ith crystal righ sunday night at 8:00 on c-span's "q&a." >> they both -- politicians from both sides said they would be able to avoid the fiscal cliff. this included chris van hollen. also, senators mark warner and bob corker, a republican from tennessee. this is one hour.
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>> good morning. i'm the head of bloomberg government. thank you for joining us today, and thank you to deloitte for partnering with us in this event. when we launched bloomberg government just about two years ago, we had the aspiration of creating a one-stop shop, with data, tools, news, and analysis to help government affairs and government sales professionals make better and faster decisions. we went a long way toward achieving that aspiration. a big part of it is conversations on the important issues that face our nation today, particularly at the intersection of business and government. today's discussion on the fiscal cliff clearly meets that. we are honored to have such a thoughtful panel. senator mark warner, senator bob corker, congressman chris van hollen, governor tim pawlenty, who is currently president and ceo of the financial services roundtable.
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moderating our discussion today is al hunt. we always love having al over here. he really put bloomberg on the map here in d.c.. yesterday it was his birthday -- happy birthday, al. [applause] i'm going to turn things over to congressman tom davis -- this is a man who really needs no introduction here in washington but has been a great friend to bgov over the years. i would be remiss if i did not give his full official title -- he is the director of federal government affairs at deloitte. please join me in welcoming congressman tom davis. [applause] >> thank you. and most importantly, i left congress undefeated and unindicted. on behalf of deloitte, i want to thank our all-star panel. senator corker, governor pawlenty, congressman van hollen, senator warner, for participating. and of course our all-star moderator, al hunt, giving up his birthday to be here.
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we appreciate that. this is hopefully the first of many events that deloitte will be partnering with bloomberg government. at deloitte, we are particularly invested in it solving the fiscal cliff. our ceo has met with the president and other ceo's to discuss the impending crisis. we even published their own study on the deficit, copies of which are available here today. we look forward to continuing this conversation, keeping the dialogue on going for the next month is critical if we're going to solve this problem -- and we think our panel will be very enlightening in terms of what the issues are. so, al, with that i will turn it over to you and the panel. we look forward to reproductive hour. thank you very much. >> can everybody hear? i welcome you all to bgov -- if you do not know as much about it as you want, i invite you to stay, because it really is a fabulous place. we do have an all-star panel. i will start with my left,
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which is where bob corker says i always start. tim pawlenty, former governor of minnesota. i wrote that i thought that if he could get the nomination he would have been the strongest republican presidential candidate. i was absolutely right -- we just could not figure out how to get there from here. tim is now the head of the financial services round table, a job he took just about a month or two ago, and will be a huge player in washington in the coming months and years. chris van hollen -- first of all, he was redistricted and he kept 2/3 of his old district, but your margin did not go down at all. maybe a little -- one county he represents, where my son is, let's just say that they think that attila is a liberal. but he did an incredible job. chris, i would say, we are with two senators now, and i am always reminded of when bob dole in 1968 left the house to
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go to the senate, he said in that single act he enraged the intelligence of both bodies. bob corker is from the state that i think has produced more interesting and important politicians over the last 40 years than any other in america, even though it is a relatively small state. howard baker and al gore and now bob corker -- it really is an incredible testament to your state. it probably goes back to the tensions during the civil war -- east and west and all that. >> probably does. >> and mark warner, probably more than anyone, tom davis is encyclopedic on everything political, but mark warner probably more than any single figure has taken his state of virginia from a fairly reliable red states to a state that i would call almost a slight bluish purple. he left the governor's office seven years ago. he has been out of state government for seven years. he is the most popular figure in the state of virginia, and
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has been throughout that entire time. not only has he achieved that, as he has achieved that while he has been a member of the united states congress. that really is extraordinary. this is going to be really fun today. let me just give a quick preface. i have been in this town for 43 years. i have never seen anything like the last month. it has just been incredible. people are rallying together. it is galvanizing. it shows you what strong leadership can do. i do not think many people think you can have a strong leader who did not have roots in washington, even more given the history of this town. to have an african-american leading like this is just extraordinary. and i think rg3 deserves incredible credit for everything he has done. [laughter] and now we can talk about the fiscal cliff. let me start off just by -- we will do the house rules, except we will cut in half. 30 seconds -- then we will have time to elaborate on all this. i want to go through the panel. what do think the odds are that some kind of the deal will be
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cut by january 1 in order to avoid sequestration and all the tax hikes? mark, i will start with you. >> i think it is 80% that we will avoid sequestration. the question is, though, is this going to be a big enough deal, and will actually be enough of a down payment that it will lead to something else subsequently that will actually avoid the kind of enormous consequences of $16 trillion of debt? that percentage will be lower than the 80%. >> let's come back to the big picture -- in the short term, by january 1 -- will we avoid the cliff? >> i think it is likely that we avoid it. it does not appear that that is going so well. it is so easy for us just to do the things we need to do. i think the real line in the sand is going to be the debt ceiling. i really do think -- i have said that for a long time. i think that is when,
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hopefully, by that time anyway we will have real entitlement reform, which will bring all of this together. >> chris? >> i think it is better than 50% that we are able to get an agreement before january 1. but that is premised on a belief that our republican colleagues will recognize that the rates need to go up, as the president has said. if that does not come true, i think it is less than 50% that we have an agreement. >> tim? >> i would concur. given the consequences, i think that the odds are north of 50% that some sort of deal would be reached to avoid the fiscal cliff. i know it is hard to read the tea leaves because in the meantime you have these offers viewed by each side as not serious, kind of like fiscal cliff bungee jumping. people jump in and spring back out. but i believe the odds are good that there will be some sort of
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deal before the cliff. >> let's get into the longer- term deal -- everyone believes entitlement reform and tax reform is going to take place in 2013, maybe 2014. but just in the short term, can the republicans, can enough republicans say, we do not like it, but we are going to go along for now with the 39.6% rate and come back with a promise of next year of trying to lower and broaden the base? >> i would much prefer that we do the kind of pro-growth reform that i laid out in a bill a few weeks ago, not thinking that this bill is going to become law, but a way to show a path forward with $4.5 trillion in savings. i think that in the event that the house feels that, when they see that the senate is obviously controlled by the democratic party, you have a democratic president, you basically have the president, let's face it, not being too
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pejorative, that has been a one trick pony. it has been the rate is all we have been talking about, really nothing else. in the event -- i think this is what tom cole was saying this morning, in the event the house sees there is no way out, that ultimately you hold less of the country hostage if you do not do something -- if they do that, what does happen all of a sudden, the president has to actually do something that is a real on the entitlement side. i would say to you, i would hope that what we would do is in the interim end up with something that works for the country from the standpoint of revenues, works for republicans from the standpoint of revenues, and in that package also has the entitlement reforms that need to happen. i think we have all seen the discretionary caps are mostly bogus. we violate them nonstop. the only thing that republicans, i think even people
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like chris, who has been reasonable on all this, believe is real is intimate reform. so i would hope that we would and up -- by the way, it is easier to implement the policies that need to be implemented to solve our problem then it is to create a process to negotiate and create another fiscal cliff down the road. i hope we will not do that. i still think there is time before the end of the year to make that happen, but again, if it does not happen, unfortunately what that does is throw us into another debt ceiling situation, which is just not good for our country. we would be so much better off starting off on january 1 with this in the rearview mirror. our economy would take off and our country would be so much better off. >> chris, you understand the politics of the house from both sides. can john boehner cut a deal
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without eric cantor and paul ryan? >> i have a pretty good understanding of the house, but i always am a little afraid of wandering into house republican leadership politics. just to broaden the question a little bit -- i think the question is whether or not the speaker is going to be able to bring a good part of his caucus with him. that or require a united leadership team. >> i am talking short-term -- the next two or three weeks. >> i think that is going to be a requirement. i think one of the decisions the speaker will have to make is whether he is prepared to put a agreement on the floor of the house that might not have a majority of the republicans in the house in support. that is one of the questions. senator corker points out that there are a number of ways you can get to a yes on this, but it is not clear if there is a
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way to get to yes that necessarily brings a majority of house republicans. not that we cannot get a majority vote in the house, that they apply the so called hastert rule, that you have to have half of the republicans no matter what before you even bring a bill to the house -- that could clearly complicate matters. people should understand there is no requirement that that be done. we can get a majority vote in the house without necessarily having half of the republican caucus. >> even though i hate to mention birthdays, it was when you were a little kid, the o'neill rule, to. it was not just a republican -- >> there have been moments where speakers have allowed those to pass without a majority. >> let me ask you, tim, as a republican and as the financial services chief now -- if you were to go a long or the country were to go along with restoring that top rate, the 39.6% rate, what kind of commitment would you like to get
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in order to do that? you cannot do anything in the three weeks -- you cannot reform entitlements and taxes in three weeks. >> if i might, stepping back from that question, i really applaud senator corker's perspective of saying, if we can get something done totally by the end of the year that would be great, rather than this to work restate process. i would hope for that. it is a wonderful goal -- behind that, all of these ideas have been white papered, seminared, data runned for 20 years. the options are not a mystery. the options of what might be done have all been put on the shelf and debated for a long time. the question is, do we collectively, does the congress specifically have the will and inclination to do any of them? when i was a governor, we had the first government shut down in minnesota in 150 years. we had a dynamic similar to this. it was not precisely the fiscal cliff, but we had a very
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dramatic moment with divided government executive and legislature, and i learned some things in that moment. one, you cannot corner people so totally and so badly that they have no way out. because if you do that and you do not allow them some face- saving way out of the corner, they will have no choice but to do something dramatic. and it is a very delicate situation, and there is a margin where people can miscommunicate, particularly when you have lots of people communicating. so there's a margin of error you have to factor into these discussions as well. in that moment, back in 2003, i had a lot of leverage. i was a newly elected governor, i had a lot of political leverage and for various reasons i will not bore you with had the upper hand in the negotiations. i put the pedal to the metal. i won that round. however, the ill will that came from pushing to the other side was so strong that years later legislative leaders remembered how difficult that negotiation
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was and how unreasonable in their mind i was. we were still talking about payback six and seven years later in future negotiations. i share that -- as you think about not just this moment but the relationship between the congress and the president going forward. it is unclear whether there is enough republicans to support or even consider the rate increase generally, but at the very least i think they would want to see not just that question, but they would want to see what does it come with. i describe it as the two wings of the plane. people are working on one side, but not much discussion on the entitlement and structural spending reduction wing. republicans have put revenues on the table. there are lots of different ways to get revenue, including economic growth. there are other ways -- means testing on the table. if the goal is to get wealthy people to pay more. but it is unclear that the rate issue has been embraced or will
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be embraced by enough republicans, but it is certainly not likely to happen unless they have crystallization on the entitlement spending side of the plane, and it is not happening at the moment. >> mark warner, let me go to you. i do not believe anyone has spent more time on this issue than you have over the last year or so. i do not know if you have all seen yet, but there is a marvelous study by our great economist that says 8 $4 trillion in the plan, which is what people are generally talking about, that includes about $800 billion in savings from the afghan war, includes $1.1 trillion or so of cuts that were agreed to last year. but that does not stabilise the debt to gdp ratio. it takes a $6 trillion package to do that. are we thinking too small? as you approach next year and some kind of a package? >> one of the problems, and bob and criss have been equally as
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involved in this as you get deeper and deeper and slowly sink in to a baseline hell, which can get you in a circular circumstance, and a lot of the numbers around $4 trillion were off that 2010 base. that we keep coming back to in certain ways. so yes, the number of what it takes kids growing up, but when you count -- and bob and i could have some disagreements that we have not completely honored the discretionary cuts, but pretty much everybody agrees that you have got between $900 billion and $1.1 trillion in cuts already made. i get a little worried about the so-called accounts and how much you want to count those, whether that is washington funny money talk. but when you add interest and other things, the notion that a
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$4 trillion-plus deal over a 10-year frame with whatever your revenues spending cut ratio is is so much smaller than what is being asked of people in every other industrial country in the world as a percent of government spending, a percentage of gdp, that it is almost to my mind on american that we would not be willing to rise to this challenge, and echoing what bob has said, i fundamentally believe a real deal would do more for economic growth and more to get capital off the sidelines, not just in terms of american companies but international companies that are looking where to invest with the challenges in europe, with china going through a transition, with india's political system, as chair of the india caucus, almost more this functional than ours. we look pretty darn good if we can put a real plan in place.
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>> what would be the size of the plan? >> i think it gets north of $4 trillion, whether it gets to $6 trillion. this goes back to where you start. two points -- kind of on the opening round questions. it is important to remember that the simpson-bowles plan, which has gained a lot of attention, or the gang of six, which is built off the simpson- bowles, the presumptions that went into those plans assumed that all the top rates would go back up. when you start from that, even though i think simpson-bowles's idea that he would bring the rates down to the high 20's is a bit of a stretch. i do not think we will see that kind of across the board almost zeroing out in some places of tax expenditures that would require.
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they can show a path towards meaningful tax reform even with the rates at the higher level. point two, and this is one of the things where i think those of us on the democratic side need to help bring some clarity -- we throw around the notion that increasing the rates to the "bush levels" would, depending on your baseline, did you close to $1 trillion in additional revenue and net over 10. the issue is perhaps we need to better socialize those increasing rates, the rates themselves on the income tax side only get you a little more than half a amount. the other pieces, capital gains going back up, dividend's going to ordinary rates, the estate tax not even going back to the compromise. i do worry a little bit that we need to have some clarity on this -- we use as code, we are bringing rates back up, we ought to make sure it is a $544 billion revenue increase or a
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$1 trillion revenue increased because what is in that buckets -- i think we need to have that more socialized. >> i am going to come back to tax reform in a minute. the other part of this is going to be entitlement reform. the president has proposed some entitlement changes but almost all on the provider side. they are not as big as a lot people say will be necessary. if the republicans give on taxes, will the democrats be willing to give on issues like raising the eligibility age, means testing on taxes? medicare for more affluent recipients, excluding my wife? >> let me just say that we would support a balanced approach, and it is important to point out, as senator warner did, that we have done over $1 trillion in cuts in the next 10
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years which the president is committed to keeping. with respect to medicare, we do have a very different approach to dealing with medicare. there is no doubt we have to bring down medicare health-care cost growth. the difference is that we believe we should expand on the kind of reforms that we made in the affordable care act, where we achieved billion about $716 billion in savings, not simply by across the board provider cuts, but by changing the incentive structure, the way we pay providers so we focus on the value of care, not the volume of care. i think it is ironic that we have gone in the last four weeks from many of our republican colleagues criticizing the president for having done too much in savings on medicare, $716 billion -- their presidential candidate proposed putting that money back in, in other words adding $716 billion back into the cost of medicare, to complaining the president does not want to do enough. >> who was that presidential
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candidate? anyone remember? >> i do not want to relitigate the campaign, but it is an important point, i think, which is he proposed that we put the $716 billion net cost back into medicare, which would have shorten the life of the trust fund by eight years. now, the president's budget, and i invite people to look at it, in the next 10-year window, if you compare it to the ryan republican budget, on medicare, more medicare savings in the 10-year window then the ryan republican budget had. it gets it in a different way. he does ask pharmaceutical companies to go back to paying the rebates they were back in 2003. he also has some reforms in medigap and other areas and a number of other things the president does there. so yes, we need to look at the long term issues. we started that in the affordable care act. we can build on those things with respect to dual-eligibles
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and how will we better coordinate that care. that is a very different approach than transferring rising health-care costs on to seniors, which by the way, does not reduce overall health-care costs, just transfers them. all the data shows, if you look at the per-capita increase in health-care costs in the medicare system, compared to the private health system, actually medicare compares very favorably. medicaid has a much lower per- capita increase. so simply moving somebody out of the medicare system into the private health care system -- it transfers some of those costs, but if you look at overall health care, where we spend 18% of gdp on health, way more than the other oecd countries, we should be finding better ways to figure out the care. >> i want to bring up tax reform, i won all of you to jump in at any time, but let me put tax reform on the table, bob. there is a sense in the town, we can do it all through tax
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reform. anybody who lived through the reagan tax reform, which is often cited, let me just give you a couple differences between then and now. then they were looking for something revenue neutral. now we talk about tax reform as raising net revenue. back then, they indeed did lower the rates. how did they lower the rates? a huge corporate tax increase. that is off the table now. how else did they lower the rates? they increased the capital gains rate to ordinary income, which many republicans and more than a few democrats say is unacceptable. and finally, they had probably without question the most politically brilliant treasury secretary and deputy we have ever seen in this country, jim baker, and people on capitol hill on the other side like bradley who were dying to work together. we do not have any of that today. we talk about tax reform as if it is a magic panacea. >> well, you saw the story today in the "new york times," and the tax policy institute,
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which is certainly not a right of center institution, i think it would be slightly left of center, at least center -- if you cap deductions at $50,000 it generates $750 billion over 10 years. if you do the chain cpi, which i think mark has embraced. >> do you include charitables in that camp? >> you can include charitables, or you can also look at the health-care exclusion, which by the way is the most massive that exists. i do not know why people in the income categories that mark and i are in and now tim with his big budget job -- i do not know. >> bob, i hate to tell you, he is in a higher category than you. [laughter] >> they will publish that soon, i am sure. i do not know why we should continue to have the benefit of our health care plans coming to us in a tax-free way. there are all kinds of ways of looking at it. i do realize that to do real tax reform takes time, but i
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think we could go ahead and do some things. for instance, the $50,000 exclusion -- i realize that has been a non starter so far. i actually think we will end up with some machinations that address some of the things that mark said a minute ago. candidly, if the president got -- all he has talked about, and i think it has been damaging to the debate. i personally believe that because we have -- we have constituents who come up and see us and say, stand with the president, please, do this 2% -- this rate increase on the 2%, but if he got it, as mark mentioned, it is under $0.5 trillion. if you do not socialize all the other things, you have not done anything. i think again what tom cole was saying the other day -- maybe we should give it to him, because then all of a sudden there is a debate that takes place about the real things. i want to come back and say, you can easily get to $1 trillion in revenue with a four-page
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bill dealing with the tax peace, and again it is not something that a lot of northeastern states like, i realize, because of high state and local taxes, but you can get there. what i hope will happen is instead of spiking the ball the president will sit down with boehner, who i think really wants to do something -- i think both sides agree that they want to do something. i hope they will sit down and mesh something together that republicans can be ok with that generates the kind of revenues that we need, but also the kind of entitlement reforms. you keep saying -- i love you and you know that, and i love the things you state about the other senators from tennessee -- the fact is that the decisions, all the options around the entitlement reform have been discussed. we all know what they are. it is very simple to put them
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in legislative language, and to try to put this off just continues the misery that the american people are living through. i just do not see the need to not address their revenue peace now, but also not to go ahead and address the entitlement side. if we need to do more tax reforms down the road after we do what we are doing right now, you can go back and do exactly what you just said. do the remainder of the tax reforms in a neutral way. but you are creating a much flatter code, a broader code that does not have all the loopholes that exist. >> i can see you are dying to jump in. >> on the tax math, very little attention was paid to the president's original proposal which, in addition to raising the rates on higher income earners has a tax reform proposal. having looked at lots of different tax reform proposals, the so-called super committee, the president's proposal is
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pretty clean. he says, for high income earners, we are going to reduce the value of deductions to 28%. he actually includes some things beyond the big three -- the mortgage interest and charitable, and state and local, to include high income earners, some of the things senator corker is saying. >> there are some similarities. >> but it is very clean. you could do this very quickly. and it does not have the negative impact of some of the ideas were you cap deductions, which depending on your state could totally eliminate charitable deduction. you would be taxed fully on all the money you give to charity with those proposals. the president has a clean way. out of the $1.6 trillion, it is $600 billion from tax reform and he gets $1 trillion from raising upper income rates. to put in perspective, we go over the cliff, it is $5 trillion in revenue over the next 10 years compared to $1.6. senator warner has pointed out, look at the bipartisan simpson- bowles, they propose more revenue than the $1.6 trillion
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the president has proposed. that is embedded in their plan. the president's proposal has less revenue than is imbedded in simpson-bowles. and he has the tax reform element as well. i hope people will really take a look at what the president has put on the table and not just because he did it say that that is not the right approach. >> mark, and then tim. >> a couple things here. to try to keep this in perspective. i do think it is important -- how did we get here? let's briefly refresh. both sides share the blame on this. let's not lay out one side or the other. in the last 12 years as a country, we took, depending on where you start, $4.5 trillion out of our revenue line at the same time that we double defense, a tree today whole new category of spending called
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homeland security, went to war twice totally on a credit card, created a brand new entitlement medicare part d, and we have the aging of a population that means the entitlement programs that have been wonderfully successful, those of us were willing to say we need to entitlement reform, not because medicare and social security have not been successful, they have been, and consequently, all we are living a lot longer, which is good, but it does mean the math -- when i was a kid, 16 people were working paying for everyone retiree, now is 3 to 1, and in a decade will be 2 to 1, means we have to make adjustments. the math deniers around that i have a hard time grappling with. >the sense in-bowles -- simpson- bowles gang had $2.40 -- $ 2.
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tralee4 in in revenue. if we think we need to go bigger, which i do believe -- $1.6 trillion is still only 1/3 of what we had in the revenue line in the 90's. in my memory, the american economy did pretty darn well. i do think there are ways to get there. on entitlements, i find we have to challenges around health care. one, if you go back to mr. ryan's plan and the others, most of the dramatic changes he had to not even occur until -- if there is any crowd to do this in front of, you are the ones. most of the entitlement reforms in front of most proposals do not take place -- that is where my real problem is. yet we have this mechanism, a
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referee that does not give us any credit for things that happened. the ryan plan does not touch medicare -- how do we bridge that? many of my republican colleagues have said, if you do real structural reform, even if it takes a while, you have to get some credit in. one last point on this -- there are a lot more similarities if we could get past some of the language. public auction, premium support -- all these questions about who bears the risk. beneficiaries or providers, or some mix? we talked about building on the affordable care act notions of let's try to have the ability to
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make consumers better utilizers of health care. if some ideas work for the uninsured population, finding ways for them to work for the medicare population should be a common goal. i think there's a lot more commonality, particularly around bring down health-care costs, then we acknowledge because we have gotten caught in these terms that have -- ideological baggage on both sides. look at how you bring down health-care costs in a way that does not restrict the quality of care you get. we could find some common ground. >> just address what you think -- what does the business community, especially the financial community, have a stake? >> the business community is concerned about the impact of the deal not getting done and what that will have on the economy. as the congressional budget
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office said, if you do not get this deal done, unemployment is going back over 9% in 2013 and we go back into recession. if you are hoping for economic growth and capital formation deployment, that is a huge problem. there are a lot of views about the details of this, but going back to the president and congressional leaders -- ask each other in private, what can you live with and what are your redlines? the president has said publicly a red line for him is tax fairness and raising rates on the wealthy. if the analog to that is a red line for republicans that they cannot raise rates, you have an irreconcilable problem in the near term. then the question becomes, if the goal is to get more money from wealthy people, there are lots of ways to do that. you heard some consensus around capping deductions. there are ways to do that in terms of limiting or capping of certain deductions and credits
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and exclusions. there is means testing in entitlement programs. for republicans, on the entitlement side, we will monkey with reimbursements to providers and move toward guy you added payments. all of which is good positively -- they do not fear they are going to bump up retirement ages or eligibility ages and have what they perceive to be real structural reforms and entitlements, even in the second 10. then he will have people saying, we are not going to do the tax deal or the revenue deal unless we see what they perceive to be real entitlement reforms. the parties have to ultimately saytono, what can you -- no, one can you live with, what is your red line, and is there overlap to put a deal together? what we are seeing now is each side -- there are a ton of ways to do tax reform. when i was governor i propose to
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cut the corporate tax rate in half and clear out a bunch of exemptions and inclusions. i thought i would be up from the left -- it was all my ceo's saying, what are you doing? the details matter. we have to get away from the point -- you cannot push people to a place where they cannot go. leaders and negotiators have to understand that and communicate and figure out where their common space is. i will andorra started earlier today -- you cannot corner people with no way out. otherwise you will have failure. >> i will turn to the audience -- bob? >> i wanted to respond to the entitlement piece. i'm a huge fan of paul ryan. i think the guy -- regardless of if you agree, he puts things out there and things about them. i think on entitlements it is very important that -- unfortunate the ryan budget did not do anything in the first 10
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years. that treated an unfortunate set of expectations. i agree --2 there are --7 trillion -- $27 trillion of unfunded liabilities down the road. we can make changes right now to the medicare program that is not painful to seniors but painful to politicians. we can begin -- it begins to do the things we need to do. the best thing we can do for our country, the best thing we can do for those people struggling for jobs is to go ahead and do this now, put it in the rearview mirror. the only thing lacking is not intellect but political courage. secondly, we have to have entitlement reform that is real. this is where the money is. on the revenue case -- if you can get to people in the room, we can move beyond as redlines tim was planning and resolve this.
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among the mass of people on the democratic and republican side, i do not think there is that big of a difference. it just takes the political courage to sit down and make the decision to get this behind us. >> on -- they make three points -- unlike rick perry, they run them all. [laughter] let's turn to the audience -- the first question, then we turn to the rest. >> right now we are facing a fiscal cliff. last year we were facing the debt ceiling. before that, we were looking at several potential government shutdowns. at a different level, the appropriations process has not worked as intended for years. neither has the budget process. it seems like abnormal is the normal. that type of activity in this situation where we are already looking ahead to the next potential showdown, as he suggested, with the next debt
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ceiling altercation, this creates uncertainty, which is not good for the private sector and certainly is not good for the federal government in terms of its ability to function in a normal way. how can congress break out of this? >> do what we are hired to do and to appropriations in a timely manner. in maryland, we have a lot of defense contractors very concerned about sequester. many of them say, warner, warner, a nuisance and-bowles. -- do simpson-bowles. everyone supports it, but no one has read it. but the top line numbers are almost the same -- next time you do a default, do not make it so awful.
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putting a gun to your forehead -- that is what you have done. do a defog you can live with -- default you can live with. i agree with you that the most ridiculous thing taking place in the last years, particularly from some of those who say they want to not make the government in efficient, is this constant jerking back and forth a potential government shutdown. nothing is more inefficient to the largest organization in the world, the federal government, and the department of defense as a subset, and stopping and starting the amount of hundreds of millions of dollars lost each time you grind to an almost near fault of government. stop contracting, restart it -- it is crazy. everybody i've talked to says, what ever but did you give us, give us a two-three year run away.
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-- runway. >> going back to tim's comment -- is not good to have these red lines. it is best to figure out a way so you do not and -- getting passed this fiscal cliff by creating another one with the debt ceiling. the best way out -- we passed a bill yesterday on the floor, it passed 98-0. that does not make news. it came out of committee -- a defense authorization bill. you had a majority and minority that work together. all kinds of amendments that were agreed to and voted on. and it passed. that is what we have not been doing. we have had bills come out of both leader offices, airdrop on the floor, that are intended not to pass but to show differences. if we can not just through regular -- go through regular
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order, things would be just fine. >> they have regular order in the house. >> regular order in the house has not brought compromise. i would like to see things go to regular order. i am a big proponent of allowing them to work -- we do need to recognize that in the era of divided government, where you have one party in control of the white house and another in control of the house, you are going to have a lot of give and take. in that environment, commonplace is essential. it -- if you go through the last campaign, it is not that big of an area. compromise is required. give-and-take -- people have to accept some things they do not like as part of a larger agreement. i would say getting a comprehensive agreement now that resolve's many of these issues
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would at least reduce the constant threat of government shutdown. that is why this is so important going forward. >> i would remind everybody we have threats of government shut down in the past -- the famous showdown with newt gingrich and clinton. when you have divided government, you have clashes of major philosophical difference. the key is being able to have an element of compromise as part of that process. that is exactly the place we are in right now, trying to find that point. >> the best model for all of you who are working so hard on this may well be speilberg's movie about lincoln. lincoln made deals. you know what, he achieved great, great goals. it goes to the point you are making -- politicians are
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supposed to play politics, that is not a dirty word. >> the legendary "bloomberg view" columnist -- margaret carlson. >> i had this plan for a couple weeks -- i thought, this could happen. when you said you cannot get people in the corner as the president has with the tax increase on the wealthy -- here is the plan. on december 31, the bush tax cuts expire. after you have your champagne and you are funny hats on, on january 1 at 12:01 a.m., there is a middle-class tax cut and the top rate is 39.6%, then they are cut to 37%, so republicans get their tax cut.
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isn't everyone find that? the markets do not crash and all the dreadful things do not go into effect on january 1 because you fixed it and everybody saves face and gets what they want? it could be the carlson-hunt plan. >> you also get less revenue. >> they will have to give something on entitlement reform -- they will have to make that up. >> i personally believe there is going to be a result to the issue you are talking about before the year is over. >> the issue margaret is raising here is the one that tom cole, the conservative republican member from oklahoma has focused on. he recognizes that if you can
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get into january, it will be very difficult for republicans in the house to tell the american people that everybody's taxes are going up to provide this extra tax break on the amount of income above $250,000, which is exactly why tom cole said, let's not roll the dice on that issue. the question is whether -- talking about house politics now. and of members of the house republican caucus will recognize that is not a good place to be in. it is a bad place to be in policy-wise, politically, and therefore to address the issue -- i would like to see it today, but at least in the scenario you are talking about. >> i am with potomac research group.
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from what i hear -- what i hear you saying is the negotiators are probably going to use a baseline different from the congressional budget office. senator warner talks about getting savings from the tax break on wealthier americans. as i enter stand it, that is already built into the cbo baseline. how much are we talking about in terms of real savings, and how much in tax increases, and how much in terms of a redefined baseline? and the other question is -- can you give us an idea of what it is in terms of framework we are likely to see at the end of the year? are we going to see a bunch of top line numbers, or some soaree going to see the details -- more detail than that. if we see a bunch of hot line
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numbers, how long does it take to get to feeling that in and drafting legislation and building a coalition to get it through congress? >> i would like to answer the second question. there is an old adage that says you do not learn a lot from the second kick in the shin from the meal. ad,have been down this rout . we had 12 very high caliber people who work in the super committee -- who would have ever thought we would spend -- this outstanding group of people could not come up with $1.2 trillion in savings. it is almost beyond belief, is it not? since i know all the decisions we have to make are not intellectually demanding, they
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just take political courage, i cannot agree to any process like you just laid out. i am sorry. it is not a lot to learn -- we have had to drive runs,. -- two dry runs,. . the congress put the fiscal cliff in place so we would resolve that issue right now -- that is what we need to do. >> mark, do you want to take the first question? >> you raise a great point. this is where people's eyes glaze over -- these numbers can say whatever you want to say, but the notion, and this is where i would disagree with margaret's approach a little bet -- i do think there'll be a relationship between revenues and entitlements. if we need to go bigger, we need
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to push all of those. there are some who say, the idea that the american people is going to buy into this notion of, ok, we will let these taxes go up. then we go through this magical witching hour -- 90% disapproval go up to 99% disapproval. he will have general consensus that you have to get north of three -- you do this, you will get 500 in interest savings alone. they should not be as challenging as it is. the onlyr thing -- thing i would disagree with bob a level that is on the fact
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that, i have been a huge advocate and continue to be a huge advocate of the tax reform debate. it is a critically important piece -- you could not create a more efficient tax code and we have right now. -- inefficient tax code and we have right now. folks trying to categorize current income as long-term capital gains and mevmedicare fraud -- thinking about cutting down the deferential -- differential. i am one of the major leaders in this debate, i have been hugely supportive of all bipartisan efforts. they tim to me -- they came up to me -- just not touch the charitable or state and local taxes. i do not think we have what it
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means to go through a tax reform discussion when you get down to the details. the idea that it will be painless -- that you go through the debate and end up with caps. some say, cut them all down and and build them back -- in a perfect world that would be a valid exercise. i do not know how we get there. >> the definition of tax reform is do not tax you, do not tax me -- >> on the second piece, the danger with putting goals that would leave it to the regular order -- the regular order will not produce a result. there are two ways to deal with that -- build another fiscal cliff to put on pressure, which
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puts us right back where we are, or have a default mechanism which has policy set aside that both sides do not like. one thing about the baseline -- under current law, if the congress packed its bags right now and went away, at the end of the 10-year period our debt to gdp ratio would be under 1%. he would definitely solve the deficit problem. >> under 1%? >> i believe. >> the percentage of your debt -- not the deficit to gdp? >> deficit to gdp. now, we do not want to get there that way. the same way we do not want to go over the fiscal class. the fiscal cliff is big austerity -- you get $seven trillion in deficit reduction
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over 10 years. but you do not do it you really want to do it. when it comes to the baseline, you have to work together as part of an agreement to get to the right baseline. that does not mean it is not real world deficit-reduction. it is. does it mean it is better than current law? maybe not. but there is agreement that current law, including the fiscal cliff, is not the best way. >> we have our baseline. deficit to gdp? >> did i say that? >> just to be clear -- if you look to the 10-year period on the current base line and get under 1% deficit to gdp in 10 years -- >> because you get seven years of debt reduction under current law.
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>> if anyone wants to read more, please read the piece on what it takes. i thank you all for being here today. one reason we have to and is these poor people will be so instrumental in getting us out of this mess that we have to get them back to work. >> we only wish that. >> senators, thank you, congressman, thank you. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> we will continue to examine the fiscal cliff with armstrong williams. then the tax writer for cq roll call will take your questions about what is known as tax expenditures. washington journal is live every day at 7:00 a.m. eastern. our coverage of the fiscal cliff
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has reached speaking with the house speaker and the minority leader. president obama speech to members of the business roundtable about the negotiations and the economy. he told ceos he would not negotiate. because of technical problems, we can only show you part of his remarks. >> we are grateful for both the electricity and the engagement we have had with members of your team. i know your team has really reached out significantly over the last few months to many people in this room and i know personally, the outreach to us is genuine and we know you are
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seeking solutions. but that was outlined very sincerely this morning when we met with jack and the rest of the team. i hope you get the same sense of purpose and commitment from us as we engage with you. there aren't a lot of wallflowers' in here. we are eager for a two-way exchange nonetheless. hopefully your take away would be to have a useful purpose in the dialogue. mr. president, thank you for joining us today. [applause] >> good morning everybody. it is great to see all of you. many of you had a chance to see individually or in small groups over the last several months but good to be back at the business roundtable and jim, thanks for your leadership. originally, my team had prepared some remarks.
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they always get nervous when i'm out there on my own and never know what i might say, but given the dialogue that we had the last time, i thought it was useful for me to abbreviate my remarks, speak off-the-cuff and then spend the rest of the time having a conversation. let me begin by saying all of you in this room are not just business leaders, not just c.e.o.'s of your companies but economic leaders and thought leaders in this country. and i recognize that all of you have an enormous investment not only in your own companies but in the well-being of america. there are a lot of patriots in this room and people who care deeply about not only your bottom lines but also the future
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of this country. you have shown that over the last four years. we have gone through a difficult and economic period as we have seen in most of our life times and we have emerged not yet where we need to be, but we have certainly made progress. and the reason we have made progress in part is because of the outstanding management and productivity, gain s inefficiency and competitiveness that you have been able to achieve in each and every one of your companies. i have said it to the small groups and let me repeat it to the large group. i'm passionately rooting for your success, because if the companies in this room are doing well, then small businesses and medium-sized businesses up and down the chain are doing well. if the companies in this room are doing well, then folks get jobs, consumers get confidence and we're going to be able to compete around the world. now, the good news is that despite the extraordinary challenges that we have seen over the last four years, there
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is progress in some key sectors of our economy. we have seen housing finally begin to bounce back for the first time and that obviously has an enormous ripple effect throughout the economy. consumer confidence is as high as it's been. many of you over the last two throw h, three years have experienced record profits or near-record profits and have a lot of money where you are prepared to invest in plant, investments and hire folks. obviously, globally, the economy in europe is still soft. asia is not charging forward and some of the emerging markets are not charging forward as quickly as they were a few years ago, but what all of you recognize and what you have told me is that everybody's looking to america. because they understand that if we're able to put forward a
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long-term agenda for growth and prosperity that's broad-based here in the united states, that confidence will not just increase here in the united states, it will increase globally and we can get the kind of cycle that all of us have been waiting for and want to see. what's holding us back right now is a lot of stuff that is going on in this town. and i know that many of you have come down here to try to see if there is a way to break through the log jam and go ahead and get things done and i'm here to tell you that nobody wants to get this done more than me. what we have said instead is, let's allow higher rates to go up for the top 2% and that includes all of you, yes, but not that is going to affect your spending, your lifestyles or the economy in any
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significant way. let's make sure that 98% of americans don't see a single dime in tax increases next year or small businesses see a single dime in increases next year. and by doing that alone, we raise almost $1 trillion without any adverse effects on the economy. let's combine that, then, with some additional spending cuts and some long-term entitlement reform that can get us to a number close to $4 trillion, which stabilizes our debt and our deficits relative to g.d.p. for at least a decade, perhaps more. that's our plan. that's what we present. the holdup right now is that speaker boehner took a position, i think the day after the campaign, that said we're willing to bring in revenue, but we aren't willing to
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increase rates and i just explained to you why we don't think that works. we're not trying to -- we're not insisting on rates just out of spite or out of any kind of partisan bickering, but rather because we need to raise a certain amount of revenue. now we have seen some movement over the last several days amongst some republicans. i think there is a recognition that maybe they can accept some rate increases as long as it's combined with serious entitlement reform and additional spending cuts and if we can get the leadership on the republican side to take that framework, to acknowledge that reality, then the numbers
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actually aren't that far apart. another way of putting this is, we can probably solve this in about a week. it's not that tough. but we need that are conceptal breakthrough that says we need to do a balanced plan, that's what's best for the american economy and that's what the american people voted for and that's how we are going to get it done. let me make one last point and i'll start taking questions. there had been reports, and these are not necessarily confirmed and maybe some of you have more insight on this than i do, perhaps as the republicans go ahead and let middle-class tax cuts extended, upper income tax goes up, otherwise we don't get a deal and next year we come back and the thinking is republicans will have more leverage because there will be another vote on the debt
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ceiling and we will try to extract a stronger hand on the debt ceiling. i have to tell you that is a bad strategy for america, it's a bad strategy for your businesses and this is not a game that i will play. most of you were involved in discussions and watched the catastrophe that happened in august of 2011. everybody here is concerned about uncertainty. there is no uncertainty like the prospect that the united states of america, the largest economy that holds the world reserve currency potentially defaults on its debts. but we give up the basic notion the that the united states stands behind its obligations. and we can't afford to go there
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again. and this isn't just my opinion but the opinion of most of the folks in this room. when i hear some on the other side suggesting that to resolve the possibility of a potential or a quarterly debt ceiling crisis, that there is a price to pay, the price is paid by the american people and your businesses and economic environment worldwide. and we should not accept going through that. john engler -- he and i philosophically don't agree on much -- \[laughter] >> i'm just being honest about john, he is a great politician and comes from the other party, but john is exactly right when he says that the only thing that debt ceiling for is to destroy your credit rating. so i want to send a very clear
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message to people here. we are not going to play that game next year. if congress in any way suggests that they are going to tie negotiations to debt ceiling votes and take us to the brink of default once again as part of a budget negotiation, which by the way, we have never done in our history until we did it last year, i will not play that game. we have to break that habit before it starts. so, with that, let me just say, we have one path where we resolve it fairly quickly. we have some tough spending cuts. we reform our entitlements. we have modest revenue increases. you get business certainty and you do what you do best, innovate, hire workers, make profits, do well by your shareholders and grow america and we have open-running room
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next year to deal with infrastructure, tax reform and immigration reform that will further make america competitive, that's one option. the other option is to engage in a self-inflicted series of wounds that will potentially push us back into recession and set back this country after all the work we have done over the last four years digging ourselves out of the hole. that's not the choice i would like to make. and make sure that everybody here in washington makes the right choice. >> they met with reporters in the capital for 10 minutes.
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>> good morning everyone. you know, this week, we made a good faith offer to avert the fiscal crisis and that offer included significant spending cuts and reforms and included additional revenue. and frankly, it was the balanced approach that the president's been asking for. now we need a response from the white house. we can't sit here and negotiate with ourselves. our targets and framework are things that we can all agree on. and it's exactly how we approached our discussions in the biden group, my discussions at the white house a year and a half ago and for that matter, in
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the joint select committee. and if the president doesn't agree with our proposal and our outline, i think he's got an obligation to send one to the congress. and a plan that can pass both chambers of congress. if you look at the plans that the white house has talked about thus far, they couldn't pass either house of the congress. we are ready and eager to talk to the president and to work with him to make sure that the american people aren't disadvantaged by what's happening here in washington. >> good morning. you know, i think at this point, pretty much most folks in the country and certainly in this town know where both sides are on taxes. i think we understand that. but to the speaker's point, we have not had any discussion and any specifics with this
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president about the real problem, which is spending. we have got to do something about the spending. and obsessions to raise taxes is not going to solve the problem. what will solve the problem is, doing something about the entitlements, taking on the wasteful spending in washington. we can't just keep borrowing money and raising taxes and expecting the problem to go away. that is our point to the president. and as the speaker said, we want to sit down with the president and want to talk specifics. we put an offer on the table now. he has out of hand reject that had. where are the specifics and where are the discussions? nothing is going on. the people of this country are suffering. we ask the president, sit down with us and be serious about the specifics in the spending so we can stop the wasteful spending in washington and finally address the problem.
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>> as we continue to try to solve the fiscal cliff, the thing we have continued to look at is our economy. today in the whip's office we will have small family-owned businesses in there and talk about ways to protect the family business, continue to grow while at the same time make sure we solve this fiscal cliff. look, each and every day as we walk the halls, you continue to ask the questions. you want the answers to solving the fiscal cliff. we put the offer on the table and the president now has to engage. the next 72 hours are critical. if he sits back and continues to play politics, that will give you the answer of where we're going. this is the opportunity for the country to lead and opportunity for the president to lead. >> as these fiscal cliff negotiations and debate continues, i think it's important to remember that washington doesn't have a revenue problem, it has a spending problem. and under this administration, under president obama, we have
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seen record deficits and a record debt accumulate, and yet he keeps demanding that we have seen record deficits and a record debt accumulate, and yet he keeps demanding that we raise taxes to pay for more spending. this will only hurt our economy. ernst and young has done an analysis of the president's proposal and said it will cost several hundreds thousands of jobs. there is a better way and the speaker has laid it out. it is an approach that calls for tax reform by reforming the tax code and passing responsible spending cuts in order to get our fiscal house in order. that's what america wants. this is our opportunity to do the big things. this is our moment to provide that leadership that america desperately wants and we stand here ready to take the action necessary. >> the american people are hurting right now and now is the moment where we need to step up to the plate and solve the problem.
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cann't know how any of us look our kids and grandkids in the eye and explain to them that we aren't willing to pay for the things we are enjoying today but just going to send them the bill. that's why republicans have the proposal on the table that fixes the problem, puts us on the course to solve the problem, which is the out-of- control spending side of the ledger. we have come to the table with receive news. in fact, i think our receive news address the issue better in a pro-growth fashion fixing an old tax code that is out of date. we hope the president will be coming to the table and be serious about negotiating. >> president obama has an unbelievable opportunity to be a transformational president, that is, to bring the country together uniquely and solve this debt problem in ways that other presidents haven't really had that opportunity, or he can dissolve into zero-sum-game politics, where he wins and other people lose. i have seen an attribute in president obama when i served
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with him in the state senate where he was able to rise above and transform some very controversial issues in a way that was powerful. and it's my hope that president obama rises to this opportunity, avoids this zero-sum-game splash and instead leads the nation in ways that only one person can do, that is the president of the united states. house republicans are prepared to get to yes. house republicans are not prepared to get to foolish. and it is foolish to reject president obama's own self- described architecture of $3 in spending cuts for every dollar in new revenue. we are prepared to work and call on the white house to do the same thing. >> speaker boehner, president obama, the white house projection last offer -- \[inaudible]
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53% of americans will blame republicans in congress if you go over the fiscal cliff. how long can you have that hard line on those making 250 and above. >> america faces a very serious problem and our goal is to make sure it gets solved. we have a debt problem that is out of control. we have got to cut spending and i believe it is appropriate to the receive news we are putting on the table are going to come from, guess who? the rich. there are ways to limit deductions, close loopholes and have the same people pay more -- more of their money to the federal government without
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raising the tax rates which we believe will harm our economy. \[inaudible question] >> i think our members understand the seriousness of the situation that our country faces. trillion dollar deficits for as far as the eye can see. $16 trillion of debt on the books. every man, woman and child owing the american government $50,000 and that number is increasing every single year. as a result, our members understand that we've got to solve the problem, and we will. >> the house is going to leave today with two days left in the week -- \[inaudible] >> the house leaving with the fiscal cliff -- >> i will be here and will be available any moment to sit down with the president p to get serious about solving this problem. >> does the conference realize that you don't seem to be
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negotiating? >> our members believe strongly that raising tax rates will hurt the economy. closing loopholes, especially on those who are wealthy is a better way to raise this revenue than raising rates because raising rates will hurt the very people we are expecting to help create jobs in our country. thank you everybody. >> house democratic leaders spoke with reporters in the capital. this is 15 minutes. >> we are back. >> i know that you appreciate that we all have a day job and
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this is part of it. but we want to make sure that our ranking members that he leaves so effectively to make sure that we get all the members. let's start with you. >> allowing the middle class tax cuts, the debt limit on the table. >> consider that the republicans agree the new income tax will be a victory for the american people.
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it is becoming more if he does do that. passing the tax cut means the end of holding them hostage. >> i share the leaders view, this ought not to be a bad time. the economy and working americans, 98% pass the bill. they have the assurance that they will not be subjected to an increase in taxes january 1. it will add immeasurably to the confidence of our economy and that is why we ought to do it.
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it is not a question of a tactical advantage. working americans will have the assurance that they will still have the resources to anticipate growing the economy. >> every movement has to have an answer. i think that we continue to focus on the middle class. we continue to defend and stand for the middle class moving towards what we have in the fall right now with the mohsen -- the motion to discharge. we should move on that and then we have other things to deal with this year. to send a message to the american people, it is time to move forward and get down to doing the business of the people of this country. >> i don't think the issue of
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the middle class tax cut was disputed. neither side is going to get an advantage. i continue to believe that the overwhelming majority of republicans don't want to see the working americans, 98%, get a tax increase. the american public are saying to themselves, you guys all agree, why don't you do it. even when we have disagreements, the other side has refused to put that agreement on the floor so we can enact it. >> i will ask the both of you, don't you think that this request is expected to be so large, does it have to be
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enrolled in this conversation because you get 1.2 or 2.2 or what ever is, you have it coming off of the supplemental that. dodge the middle-income tax cut being part of that conversation? i don't think the debt ceiling has a place in all of this. i think that we continue with the rule that says the president sends it over, that is overturned. we have a path away from that because it is holding hostage any investments in the future that we can make. in to the revenue challenge that we have. but not that this will be too complicated.
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there are steps that we need to take. bypassing the middle income tax cut, it is deliberation in terms of discussion on how we go forward. a package that recognizes we have to establish priority more than others and make cuts to make sure that the judgments that we make on cuts are further up close for the economy. all of our colleagues have to our country that will be able to reach an agreement. and not to make it too complicated, a good first step to be to pass -- >> first of all, we need to pass the supplemental. the people of the northeast were
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somewhat spare on this, but the people of new jersey and connecticut, they have had a very damaging blow. we need to act on that. the way we can meet the immediate need. it is part of the math. we will have to consider all the expenditures that we make, we'll have to make that part of the agreement. whatever dollars that we expand will have to be accounted for and will have to be paid for over a longer time. it severely and adversely affected damage, we need to make that expenditure now and we need to pay for that over the longer term.
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for my of standpoint, part of the math that will have to be dealt with. >> i have taken home in good faith of what we know about the speaker's remarks as it relates to this catastrophe. i don't think anybody wants to see them in royal remarks in po. they are still without power. in many parts of the city in the region, we're really pushing back the decades and it is hard to understand unless you have been there. i think the speaker is sensitive to that, the remarks are very positive that we need to address
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the needs of the people. i would hope that this would not get embroiled in what already seems to be insurmountable problems. this needs to be addressed immediately. >> the moment when the people look to the public sector to say, do we really have this contact? are you there for us? when the storms hit last time p, the members came to us and said the devastation was so great, it changed the character of our community. the same thing can happen now unless we are there for the people. i agree with you that the
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speaker has been gracious and open with what i have heard has to honoring the social compact that we are there in times of natural disaster to remove doubt in people's mind that this will not be a political debate but a values debate. $700 billion for the tar funding. the chairman of the fed said that if i don't act immediately, we won't have an economy by monday. we acted. we had a debate and we acted. the taxpayers have been made: that and i believe that the investments that we make in this recovery will have a very positive effect on the
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rebuilding and the jobs that come with it. the more important point is the connection between the people and the government is one that is honored. >> what is the democratic contingency if the government is raised by the end of the year? what is the democratic contingency? >> the president has put forth in his budget, the leadership of chris van holland, we think all of this should go. if we take the middle-income tax cuts off of the table, then we end the hostage taking the republicans have engaged in. we are not going to do that unless you give tax cuts to the
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wealthy. i think those are areas of agreement as we go forward. i will not put forth what that is today because we go to the table to negotiate. >> the debt limit ought not to be held hostage to anything. it hurt our economy, the credit worthiness ought to be not at risk or four negotiating. those that are focused on the economy in try to grow jobs and build our economy, many will tell you this ought not to be a subject of political debate. i think from that standpoint, first of all, the president
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wants it part of the agreement so that we do not harm the economy or the creation of jobs and hard working americans by making that part of the debate. >> i want to take a moment to have knowledge of the passing of our former colleague, chairman jack brooks of texas. we were looking forward to his ninetieth birthday in the month of december. he was surrounded by his family. right before the election in texas where he wasbuild our comy knowledgeable of everything that was going on, he had the courage to pass the crime bill that had the assault weapons .anne
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it took courage and he paid a price for doing the right thing. another member of our leadership came after mr. brooks left us, but we all share a great pride to call him colleague. and his family in beaumont texas and his many fans throughout the country and in this congress. thank you all very much. >> senate democrats are urging republicans to pass the middle class tax cut. >> we're here to encourage the leadership to take up the bill that we passed on july 25 that
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would continue and make sure that taxpayers have tax cuts and we have 27 days left before middle-class families see a tax hike that will average $2,200 a family. and when folks are getting ready for christmas, they tried to get the toys out of layaway so that children have what they want to give them for christmas and they are getting ready for the new year, families need to know that they will not have extra tax bills that total $2,200. it is fair, it is one thing that we agree on and we need to get that off of the table. we have a number of different issues to address. we have already passed $1
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trillion in spending reductions. we can pass a middle class tax cut that guarantees that the first $250,000 of your income is protected from the tax hike. everyone gets a tax cut, it's ose that are not as well off get an extra tax cut. 98% of the people would see tax cuts next year if we extend all of these middle-class tax cuts. in michigan, to share with me what $2,200 means to them. one of them said it was four months of groceries.
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that is a big deal. we were figuring out gallons of gas to go back and forth to work. it could buy -- for the average commuter, they could go back and forth to work for three years. when families are going into the holidays, they need to know that we get it. we see every day, republicans in the house as well as olympia snowe that urged us to come together to get this done. we have heard from tom cole that they pass the senate bill.
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we are hearing from house members saying to get this piece done. republicans said, why don't you get together and get things done? we know that if the discharge petition comes out before the house, they have enough votes to pass it. why wait 27 days? why not just do it now. the house needs to take up a bill that we gave them back in july. it passed on a bipartisan vote here and when is brought up in the house it will pass with a bipartisan vote. >> i want to echo a little bit of what the senator said. consumers are shopping, a lot of us went through black friday and
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we are in the holiday shopping mode. when i was in alaska this weekend, the number one question that we get from people is, what are you doing to get the ball moving? we know there has to be a long- term plan. we sent over a tax proposal that mentioned to make sure that under hundred comincome and $50,000 keep their tax cut. this is a decision that can be made right now. we know that when we hear from members that that bill is up for a vote and it will pass. middle-class america will know today that that tax relief will
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continue. what is the consumer sentiment? it has improved every month for the last several months here. if we cannot make this easy step, we pass this on july 25. it is not something still lingering in the senate. it is in the house. the issue of the fiscal cliff, what's it mean? it is probably the most known phrase in politics. they say, you have to wait for everything. people understand you have to do a piece of the puzzle. you can do it today.
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the opportunity to keep this economy moving, it has done very well the last few years. we always wait for the big deal and something never happens. this is a chance for the middle class tax cut. i would encourage every day, what is holding it out? -- it up? you will see yourself getting a tax cut for the remainder of next year if we just move them forward. again, it is finished of the senate side. >> i want to thank my colleagues for the leadership on the steering committee in this area.
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we have senator olympia snowe, bill kristol of the weekly standard, like simpson of idaho. david brooks. walter jones. the national review. we're here to say that passing the middle class tax cut is the right thing to do. you don't need to take our word for it. 2/3 of the american public agree with us. you don't need to take that word either. listen to the speaker's own party. it is clear that speaker boehner as needed cover from the right flank before he can agree to any deal with the president. the speaker did not have it before. when the wall street journal editorial page says that it would not go against the anti- tax principles, what more does
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the speaker need? when he refuses to declare that decoupling would violate the group pledged, what more cover does the speaker need? when more rank-and-file republicans come out every day in favor of passing the senate bill, it gives the speaker the cover he needs. tom cole was the first on the other side to speak the truth of what should be done. he has been on tv almost every day making the case to his party in public and he was dismissed of having a minority opinion. the comments sparked a trend and those that have spoken out publicly, there are probably dozens of others that don't feel free to speak their mind but certainly agree with him privately. the house republican leadership
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are like generals conquered away in a bunker that don't realize that their army in the field has already laid down its arms. the republican leaders are in search of an exit strategy. they have won in the form of a discharge petition filed in the house for the speaker. the speaker nor the republican leadership have to endorse it out right the senate bill. all the speaker has to do is tell his members, if you are for this bill to go on the floor, you won't have any recommendations if you sign the discharge petition. -- recriminations if you sign the discharge petition. there be 218 signatures. if the speaker allowed a vote on
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the bill, it would pass. certainly with a good deal more than 218 votes. we might not win over the paul ryans. they ca they can vote no or present. let the other republicans vote their conscience and this bill will pass. it was reported that senior aides are considering just such a strategy to give them a soft landing in the tax debate. they live to fight another day on spending cuts. we agree that a tax hike on middle-class americans should be taken off the table in the middle of the christmas season. once republicans agree to higher rates on the wealthy, they can quickly fall into place. let's stop with the offers and
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counteroffers that are leaked only to manufacture headlines. >> senator schumer, d think whatker boehner's court -- responsibility do the democrats have. >> pass the tax cut bill and we can move forward. it was not much of a proposal at 0. all. what tax entitlements would you propose cutting? and on whom?
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second, what medicare and other spending cuts would you propose? people propose large numbers and never fill in details. but we have filled in the details with our first step. let them tell in the details of their first step. they have not done either, so it is not much of an author -- an offer. >> they did not include having the top rates go up on the wealthiest americans. their proposal goes right back to that class. charitable deductions, mortgage relief and legislation i have had them place -- in place. there is a whole range of things you have to go through. that is the point. we are not going to do that.
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we have to make sure that the wealthiest help pay down this large deficit. we have large discussions going on in the senate at various places. we know what the parameters are. the president is ready, willing, and able to sit down and negotiate this. >> the statement, we have done something. we want every tax rate to go up. the interesting part, we agree it should not go up. we disagree on the top 2%. why don't we go where we agree
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and make sure those folks in the middle class don't have them increased. you have to start somewhere. we all agree on this. they just don't want to use the procedure to allow their own people to vote on it. they're holding the middle class hostage for small issues that they will continue to fight over and over again. we all agree on these rates and we just disagree on the top two. >> thank you. live to fight another day is your advice. when that other day comes, will democrats refused to entertain any discussion on entitlement cuts? >> there are many proposals that have been made by a variety of people on our side in that area. the bottom line is very simple.
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we can't until we get an agreement on the tax side. we put a downpayment on the table and we were very specific. we said exactly what it is for tax cuts on the highest rates, capital gains and dividends. it was all put on the table. they put nothing specific on the table. to ask us the second step when they haven't done their first makes no sense. we're not going to negotiate against ourselves. >> on one side is the president and the democrats have said that the threshold is not extending the rates. we are very specific. tell us where you will cut in medicare. tell us what your talking about specifically.
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by the way, we have already done $700 billion. that was in savings in medicare by stopping over payments and doing a number of other things that focus on prevention. of course we are willing to sit down and look at everything within the context of what is good for seniors and what is good for people. that was inshow what the line ie very specific. >> just to remind you, we have already done $1 trillion. we are not afraid of taking on the challenge that this country is facing. again, they have an opportunity today, right now, to make sure middle-class america not only takes this of of the who-do -- to-do list.
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we've done medicare. we've done our position on taxes, waiting for the specifics. it is pretty simple. >> it is bipartisan with $24 billion in cuts and deficits that they are welcome the past right now and have additional cuts. >> [inaudible] >> we ran an election on that issue, we campaigned on it, and the american people are for it. the logic is very simple. speaker boehner should go to the top rate and if he doesn't want to himself, he can tell members of his congress that we want to sign the discharge petition with no recriminations. we will get the first major down
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payment on which we know has the support of the american people and both houses in the congress. and we can move forward and go to the next step. we think that the top rate is the way to go and we are seeing lots of movement on the republican side. we think that is the way to go. >> hall doesn't give republicans a lot of leverage in the next step? how that is the case at all. we are in a situation where there are very clear the american people would come together and get extended. they have our range of other issues. we look at what is happening on the debt limit and there is a broader package on both sides.
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i can't imagine how that puts them in a situation where they have the leverage. now we have to go on and agreed to a larger package. >> i think they learned their lesson with the debt ceiling and i don't think it is leverage. the whole thing turned around when it looked like they would be willing to let the united states forgo its payment of debt in 2011. the whole thing turned around. i think they have learned that mistake, and any talk that that as leverage for that is false. >> you support this decoupling, the president proposed $600 billion more in revenue from deductions. which of you supports getting
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taxes raised? >> speaking for myself, i think it is very important that we address this issue, they don't have an additional $2,200. do we have other areas that we need to look at? we can look globally how to be competitive. i would argue for a number of things that would focus on domestic manufacturing. there are areas where we can come together and negotiate. senator baucus and hatch have pulled us together. i think that we can get argue ff that piece done if the first piece is off the table. i am not sure i would lock myself into an exact number, but
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i believe there is more that we can do. >> i think it is harder to get the $4 trillion deal without the revenue. >> as we move forward, i sponsored with other democrats and republicans tax reform legislation. generally, this is where you remember that this is a big problem that has accumulated over 40 years. there has been a lot of discussion. start doing something. this bill is a start. all of us have ideas. some of us of her revenue ideas. clearly, we all agree on this.
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>> would you support turning off or delaying the sequester? >> i think that we would come together on additional downpayments. a lot of members would like to see us do i go back to the fact that we have a farm bill that has savings in it. that is the truth. frankly, we came together on a bipartisan basis, no substitutions can get done, because we did it. there is a way to take the form bill savings and a couple of other things, put it together, and create a down payment. [indiscernible]
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>> if we have a joint agreement on policy, which we are actively involved in and working on right now, along with the cuts we have proposed. thanks, everybody. >> republican senate minority leader mitch mcconnell also talked about the so-called fiscal cliff on the floor of the senate. >> when the two parties were set down to discuss the so-called fiscal cliff, it was widely assumed by republicans that obama and democrats badly wanted to avoid it. that was the premise that any possible agreement hedged on. that was the common goal, or so we thought. of the past couple of weeks, it has become increasingly clear to many of us that we were simply wrong about that. incredibly, many top democrats including the president seemed part perfectly happy to go off the cliff. that is why the president has been more interested in campaign
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rallies and actually negotiating a deal. it explains why the president is now stubbornly insisting on raising tax rates when he himself said just last year that you could raise more revenue from capping deductions and closing loopholes. them or balance. it's about an ideological campaign that most americans thought would have ended on november 6, and that's also why the president sent secretary geithner up here last week with a proposal so completely ridiculous it wouldn't have passed the house, as i indicated earlier, if nancy pelosi were still speaker. it was more of a provocation than a proposal, to be perfectly frank about it. it was a message that the president doesn't want to deal at all. to date not a single democrat has come forward to support the geithner proposal, and anybody who actually looks at the details would certainly understand why. as i just indicated, it includes a $2 trillion tax increase over ten years, the biggest
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real-dollar tax increase in u.s. history. it increases taxes on nearly one million small businesses in the middle of a jobs crisis. according to ernst & young, this type of rate hike would cause more than 700,000 americans to lose their jobs. it raises taxes on investment income, harming economic growth even more. it includes tens of billions of dollars in more washington spending in a deal supposedly to cut the deficit. and most outrageous of all, it gives the president of the united states unilateral power to raise the limit on the federal credit card, the so-called debt ceiling, whenever he wants or as much as he wants. and while i'm flattered the administration has taken to calling this the -- quote -- "mcconnell provision" they seemed to have forgotten how this worked in the budget control act. we gave the president the authority then to request a debt
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ceiling increase, but that was only after the white house agreed to $2 trillion in cuts to washington spending and agreed to be bound by the timing and amount set by congress. this time the request is for the president to have the ability to raise the debt ceiling whenever he wants for as much as he wants with no fiscal responsibility or spending cuts attached. this is an idea opposed by democrats and republicans alike. it's a power grab that has no support here. and so it's not only completely dishonest, it's juvenile to compare it to last year's debt ceiling agreement. it would also be incredibly irresponsible since history shows that the only major deficit-cutting deals we ever do around here -- ever -- comes after debates over the debt ceiling. it may be a good idea if you don't care about the debt, but it's a nonstarter for those of us who do. it also represents a dangerous attempt by the president to grab
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more power over spending, power that congress must not and will not cede. beyond these details not only will the president's plan raise taxes on certain individuals, it will also cap their ability to deduct donations they make to charities, the interest they make on mortgages, the contributions they make to retirement accounts and the value of employer-based health insurance. don't get me wrong, you heard me say if democrats insist on getting more money to washington, capping these deductions is a better way to raise revenue. but capping deduction and raising tax is a recipe for economic disaster. the president's proposal would also subject tens of thousands of small businesses and family farms to a massive tax hike to be paid by the family upon the death of the owners. it would impose a crushing tax increase on industries that employ millions of americans, including manufacturers in my
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state, businesses that operate abroad, the insurance industry, and would raise the price at the pump by targeting the oil and gas industry for special tax treatment. it's so ridiculous, as i've said repeatedly, it wouldn't have passed the house under speaker pelosi. that's why even the most liberal members of congress, the president's most ardent supporters, haven't come forward to support it. so for the white house to demand a response shows they're just playing games at this point. and if you don't believe me, ask yourself how many democrats would vote for this bill. not many. but i didn't think we should have to speculate. i still think we should give democrats a chance to demonstrate for themselves just how serious the president's plan was and how serious they are. that's why i just asked consent to offer an amendment to the russia trade bill that gave them that opportunity.
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as i noted, i would be happy to have this vote here or as an amendment to the next bill or as a stand-alone. it will not slow down what i hope is swift passage for pntr for russia. if the president's proposal is made in good faith, our friends should be eager to vote for it. so i'm surprised the majority leader just declined the chance for them to support it with their votes. so i guess we're left to conclude that it couldn't even pass by a fair majority of votes and that they would rather take the country off the cliff than actually work out a good-faith agreement that reflects tough choices on both sides. to be fair to the secretary and to the president, we didn't just put together a bill that included his $2 trillion tax increase. we also added the almost $400 billion in new tax stimulus measures he wanted as well. this bill contains a
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continuation of the payroll tax holiday, a 10% credit on new wages that will go to businesses large and small, tanned included a fix -- and it included a fix to one of the many flawed provisions of obamacare and expansion of a tax credit for businesses no one uses. this proposal reflected exactly what was in the president's budget and his various submissions to congress. i for one was eager to see this vote, to see if senate democrats were ready to support it. i think folks should know who actually wants to raise taxes on family farmers and manufacturers and who thinks we can solve our fiscal problems without doing anything serious to our long-term liabilities. our democratic friend are so focused on the politics of this debate, they seem to forget there's a cost. they're feeling so good about the election, they've forgotten
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they've got a duty to govern. a lot of people are going to suffer -- a lot -- if we go off this cliff. that's why we assumed democrats would have preferred to avoid it. we thought this was the perfect opportunity to do som x economic adviser jason berman told reporters that plans to generate revenue for closing tax deductions and loopholes would affect the middle class. this is 10 minutes. >> thanks for being here. i, as you can see, have brought a guest. jason furman is the principal deputy director of the national
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economic council. president for economic policy. he's somebody that many of you are familiar with. in the last several days in particular we've had a lot of questions and a lot of conversation about the issue of revenue, and how we achieve significant revenue as part of a broad deficit reduction package. it is the president's position, as you know, that we need to have income tax rates on the highest earners in america, the top 2 percent, rise. and in addition to that, to pass policies that he has long proposed that would limit deductions and close loopholes for wealthy earners. and the combination of the revenue accomplished through that reaches the target that is necessary to achieve the kind of broad-based $4 trillion deficit reduction that the president seeks. there's been some discussion about whether or not significant amounts of revenue can be accomplished through just closing loopholes and capping deductions.
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jason has done some work on this and for that reason i've asked him to come here today. he'll make a little presentation and then take your questions. >> thanks, jay. so i just briefly wanted to give a tiny bit of context, then walk you through a tiny bit of math that can be a little bit boring but is very important because it explains where we're coming from and where the president is coming from on this issue. the context is we're trying to cut the deficit by $4 trillion over the next decade, including what we did in the budget control act. that's the amount that you need to do in order to stabilize the debt and get the debt to start to be on a downward path as a share of the economy. and that's ultimately the economic goal that the president has in a debt reduction agreement. in the president's plan, $1.6 trillion of that $4 trillion that we need would come from
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additional revenues. and it would come from a combination of allowing the rates on high earners to go back up to what they were under president clinton, and reducing the value of tax deductions and other tax benefits that they get. before i get to how much can be raised by the second, let me just say the president is very, very supportive of curbing tax deductions for high-income households. it's been a part of his plan from his very first budget. in fact, he was and remains the only major leaguer in washington that has put forward a specific, explicit plan that would limit those tax benefits for high-income households that's been examined by the joint committee on taxation, which is the official referee for these issues in congress. that plan, though, doesn't raise the revenue that you need. so out of the president's $1.6 trillion, $950 billion comes
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from decoupling. decoupling is the high-income rates going away, the middle- class tax cuts becoming permanent. that gets you $950 billion of revenue. the question is could you plausibly replace that revenue just by limiting tax expenditures. there have been lots of different ideas out there. it's always a little bit like jell-o -- you look over here, the problem with this one; well, how about this one; the problem with that could fix this, and you go back to the first one. most of them -- in fact, none of them that i've seen have been scored, as i said, by the official referees at the joint committee on taxation. but i'll just quickly take you through one that gene sperling and i did a blog post on last week, and it's been the one that i think we've heard the most in the public debate, which is let's take the idea that you could take everyone's tax deductions, limit them to $25,000. if you have more than $25,000 in deductions you wouldn't get to take those extra deductions. it sounds like a reasonable idea. it sounds like most middle- class families wouldn't be
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affected -- $25,000 is quite a lot. and it's been claimed that it could raise over a trillion dollars. so could you do that instead of what we're talking about? well, then you start to look at the idea. it turns out 17 million middle- class families would see their taxes go up as a result of this proposal, households that make -- married couples that make below $250,000. forty percent of the revenue in this plan would come from those middle-class families. the president doesn't want to raise taxes on those families. so you fix it -- you start at $250,000 and now the proposal only raises $800 billion. but it has a cliff: when your income goes from $249,999 to $250,000, your tax bill could jump way up. you can't have features in the tax code like that. it's something no one would ever want to write in. you protect against that cliff with a phase-in; now you're down to only $650 billion of revenue.
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now let's look at it from a public policy perspective: $25,000 -- if you're a high- income household, there's a good chance your mortgage interest alone is going to be $25,000. certainly once you take your mortgage interest and your state and local deduction, you've used that entire thing. that means you're not getting any incentive to give to charity. there's no reason for you to keep your receipts when you give to charity, no reason to turn them into the irs. you've used your whole cap just on those other items. you look at the top 1 percent of households in this country -- under this proposal, 97 percent of them would lose any incentive at all to give additional money to charity. these are households that are responsible for one-third of tax-deductible giving. you take away their charitable deduction completely, you're going to get $10 billion less a year going into charity according to the types of estimates cbo has done. fix the charity -- you're now down at $450 billion; $450
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billion is a meaningful contribution to deficit reduction, it could be a meaningful part of tax reform. it doesn't get you anywhere close to the amount of revenue you're going to need to satisfy what it is the president has called for and to have a balanced plan that at the end of the day is going to get $4 trillion of deficit reduction. i won't walk you through the 18 other ideas that have been floated in some form or another in the public discourse, but all of them have this feature. a plan put forward by marty feldstein and maya macguineas that some have cited, to cap the value at 2 percent, that also would raise about $500 billion to $600 billion. if you just applied it to households above $250,000 and if you protected charity that idea would also raise in the
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neighborhood of $400 billion to $500 billion. other proposals would retroactively eliminate municipal bonds, all of those types of things. so at the end of the day, that's why where the president is coming from is a combination of those rates -- having the tax cuts expire, doing tax expenditures -- tax expenditures can play a role, but they can't make up for the revenue that you would have gotten through rates. host: we have been focusing on different aspects of the fiscal cliff. we want to look at capital gains tax and the estate tax. what is the estate tax? guest: it goes back to history -- it was put in place to prevent the united states from developing an aristocracy. a tax on estates that are passed down to heirs. republicans called the death
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tax. they have characterized it as a bad thing. it has a lot of a populist opposition to it. george w. bush signed in a phase-out of the estate tax. the top rate stays at 55%. the exemption level started rising from $1 million and going up. it was repealed completely in 2010 for one year. then it sprang back to life as part of the extension of the bush tax cuts that president obama signed into law.
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you have a debate -- very few members dispute that it needs to be continued. the debate is over whether you continue it at the current level. there is an exemption level, $10 million for a couple. or at the white house would prefer a 45% rate. that is the debate right now. there's a split among democrats. the white house wants a less generous estate tax. red-leaning states like max baucus.
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host: that was the headline recently in "the wall street journal," showing the senators. at its highest, what was the estate tax? how many people did the estate tax affect? guest: we are talking tens of thousands. right now it affects 3000 estates. the exemption level is set high historical novel. it has come down significantly. big argument from conservatives is it hits small businesses and farms. the number a hits is a small fraction.
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host: if nothing happens, what happens to the estate tax? guest: then it goes back to the levels of an exemption of $1 million. host: and that could hit about 55,000 estates in 2013. what do republicans want to do? guest: a lot of republicans like to see this repealed. some democrats support that on principle that there should not be an estate tax. the reality is that pretty much everybody in the room acknowledges it would be too big of a hit to the treasury to repeal it.
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it was extended at a rate that they found favorable. the most likely outcome is that it continues at its current level, assuming they get some sort of deal to extend many of the bush-era tax cuts. host: the white house estate tax proposal is to increase it to 45%. host: you said there is a populist backlash on this. why? guest: conservatives have been able to showcase this as a death tax. you are being taxed when you
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die. some families are forced to sell property upon the death of a family member. they have been able to strike a chord with a lot of people. it affects a small number of people nationally. it hits the overall anti-tax feeling among conservatives. the government is intruding where it should be. host: moving on to capital gains. guest: the capital gains tax goes back to the start of the income tax code where you are investing and you sell a stock or a piece of art or a piece of capital and you are taxed on the gains you have made on it. right now that tax cut was
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extended. if you're in the 10% or 15% tax bracket and, you pay nothing on capital gains. you take 15% if you're in an upper tax bracket. you have republicans fighting for an extension of the current rate. president obama wants it to go back to the 20% rate. dividend taxes are on dividends that are paid out by companies. george w. bush wanted to follow parity, that they should be taxed at the same rate. what would happen when the tax rates expire, the capital gains rate would go up 20%. the dividend rate would go to 39.6%. there would be a big gap there. they want to maintain that parity and to find something between 15% and almost 40%. why is this a battle? guest: it is a big deal for the fight over income inequality. democrats have long targeted the capital gains tax as something
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that makes the tax code less
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regressive and increases in a quality. a lot of wealthy people make money through investments. it is a big issue for corporations and investors who feel corporations are already taxed and you're essentially putting another tax. host: who pays the capital gains tax? guest: if you buy a stock and make money, you are paying it. it tends to hit upper income earners more. anybody in the stock market will be paying that. host: if your pensions are 401(k), are you paying it? guest: it will hit everybody in
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the investment community. host: we're talking about capital gains and the estate tax with joseph schatz. here are the numbers. mike is an independent college in illinois. caller: i wanted to make three points to clarify this discussion. the reason we have an estate tax is because it is a social tax. people could buy off our congressman, which they have done because of the bush tax cuts. when you die, there is an automatic step up in basis on the property you own.
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the government waives the capital gains tax on your property and you only pay estate tax. regarding the capital gains, most americans have their money in 401(k)'s. when it comes out, it is taxed as ordinary income. the capital gains tax should be treated like ordinary income because all too many people make their livelihood off of capital gains. that's what i want your guest to address. guest: so many folks make your livelihood on capital gains. that came up with mitt romney. his effective tax rate was so low.
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he was paying the capital gains tax instead of income tax so was effective tax rate was 13% or 14%. the stepped-up basis is an important point as well. you pay taxes on capital gains tax, it is based on the value of the estate when you inherited it. host: the estate tax or the capital gains tax? guest: the estate tax. host: if it's an asset, you pay capital gains. guest: right. host: we have this comment on twitter from james.
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guest: corporations would say the businesses are already being taxed. folk should not be taxed for investing in their business. host: double taxation. guest: that is the argument. when people die, they are being taxed again. that is the essence of the argument against the estate tax. host: can you start over? caller: a quick question about the comments of the 401(k). i used to work for a cpa firm. i understand they are income tax deferred instruments. when you take it out, the tax you pay is income tax. the assumption is the rate
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would be lower. let's say the rate is 25% when you retire. that is higher than the current cap gains tax rate. it does not apply to 401(k)'s or any other income tax deferred instrument. when you take them out, you pay taxes on them. guest: that is correct. you pay income tax and presumably when you retire, you are at a lower tax rate and that is the advantage. it is a separate issue.
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host: we are taking a look today at the estate and capital gains tax. if nothing happens by the end of the year, take a look at what happens at the capital gains tax. host: talk about that last component. guest: that was an additional surtax. it was a way to pay for parts of the healthcare law. they will see the top rates a bump of 3.8% come january 1. that seems unlikely to be changed as part of the fiscal cliff negotiations.
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you'll still see that surtax on top of that. host: this from twitter. guest: i leave that as it is. host: is that how much it could go up? guest: yes. host: currently it is 35%. go ahead, mark. caller: the previous caller mentioned capital gains -- the recent point about the medicare surcharge to pay for the affordable care act. ifthoughit cld be a
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solution to kill botof those birds with one stone. gut: i'm noa health-care expert. host: no probl. we have this from twitter. guest: i believe that is the case. tom in california, go ahead. caller: i have several issues with the estate tax. i am a farmer if it comes back to the normal 1 million exemptions. we work together to build this estate it wasn't just my parents but it is in my parents' name. i have to pay tax to something i have contributed to.
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host: help people understand fas estate tax? how is it your estate is worth more than $1 million? caller: we have about 1,000 acres in sonoma county, california and it is worth about $8 million or so. we have another piece of property. we used to have a dairy operation on his property. it is surrounded by the city and it will be annexed into the city. the whole family created this
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estate. when we get the $5 million benefit, it isn't per child. you have to divide that up between all the kids. if one child, one child gets a $5 million. we continually invested plan. host: can you hang on the line? i want joseph schatz to address what you're saying. guest: there is a provision if one parent dies, they can pick up a portion of the exemption from the other parents.
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it is an extremely complicated process. folks have to hire accountants and lawyers. it is enormously complicated. it has changed so much over the years. host: how much has your family spent on an estate lawyer? caller: $20,000 a year. host: how long have you been paying an attorney? caller: close to 10 years. host: how many kids in the family? caller: 3 kids. we are trying to divide the property in increments that will equal the $5 million so we can have that out of the situation before the estate tax changes by the end of the year.
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you have to go through the legal processes to get this to happen because you don't know what will happen by the end of the year. we have to get the $5 million taken off the table before it goes down to the $1 million exemption. host: what about the state of california? is there an estate tax as well? caller: no. california just raise taxes on everybody making $250,000 or more. we will get hit at the state and federal level. we have a lot of land and people that rely on us for
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their livelihood. we have people that work in the vineyards and cattlemen. host: tom, you are land rich. cash poor? how much revenue do you bring in? caller: it is sort of divided up now. my brother has his own operation and i have mine. i spend $100,000 in expenses and equipment. host: ok. caller: just from my end. host: thank you for the call. guest: it is interesting. one issue is the calculation of
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how you set up the estate tax. the rate is the issue. for other folks that are land rich, it is much more an issue for small businesses, ranches, farms, an issue of the exemption. how they can stay under the exemption and not get hit by the estate tax. some senators are fighting to keep things where they are with the estate tax. you have wealthy families and smaller businesses who are fighting for different aspects of it. host: ray in rhode island, good morning.
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caller: i used to dabble at one point with a estate tax. there are a couple of things. the estate tax is a value tax. it is based on t value the property you o. another thing thatasn't mentioned. there is insurance trust you canuythat io help y. that insurance monill help the people pay the estate tax. when malcolm forbes was dying, he tried to go out and buy all his insurance. it was kind of late for him.
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he was on his way out. the premiums were skyrocketing. there are ways to avoid or minimize your estate tax. guest: that is a good point. look at the numbers we have talked about. 0.2% of estates are affected. there are lots of ways for estates to avoid taxation. it is not hitting a lot of people. that is an argument that democrats use. en when you shrink it,t is affecting far fewer people than you think is. host: $5 million exetion.
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it is hitting 3600 estatesnd 8% of farms and small businesses. est: ne of them what had more than 1% or 2% of estates. what is theifferee between the estate tax and gift tax? guest: the gift tax is a backup and levied on a gifts that you give to someone else it is a way to make sure that folks are not avoiding taxes during their lifetime by giving it all away at death. before the estate tax were at different rates.
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that give you different advantages. that is the difference an interesting point that a caller mentioned is that a lot of states linked their own estate and inheritance taxes to their own one. when taxes are scheduled to go up, this will have big ramifications at the state level. when the bush tax cuts phased out the estate tax, a lot of states found themselves without an estate tax.
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several states established new estate taxes to bring in more revenue. host: maryann from michigan. caller: my heart really bleeds for the former who owns a multimillion-dollar estate and is wary about his one cowboy that he employs. i think that is what is wrong with this system. it is greed. host: "the new york times" is reporting this morning possibly republicans considering extending tax cuts for middle class americans. "the new york times" is reporting this --
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host: any fallback plan from republicans does not include a plan for the estate tax. guest: there is no easy solution to what is happening right now. the senate passed their tax bill over the summer. it was going to include an estate tax extension, as well. $3.5 million exemption. it was not put into the bill.
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the bill will do with a lot of things that are expiring but the estate tax will be left where was. that will be hanging out there. congress cannot let it hang out there for long. it shouldn't be at the level it was in 2001. it shows you how many things are hanging out there. even if fallback plan -- host: back to the capital gains tax on twitter. what does he mean by capital formation? guest: you want to encourage people to invest. you encourage people to invest
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by having a low capital gains rate. warren buffett and other said investors are going to invest in a matter what the tax rate is. the tax rates will not be persuaded against investing the way they do now just because it rises 5%. philosophical argument has been you want to encourage people to invest and that is why you keep a low rate. as part of the tax reform that people are looking back to now, caplet gains and dividends rates or increase to pay for lower tax rates across the board. caller: hi. i believe that no taxpayer should pay more than 10 cents on the dollar.
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the effective tax rate should be capped at 10%. the plan of double taxation. we are individual taxpayers. a corporation pays an employee and the employee pays taxes. a corporation pays the investors dividends. shouldn't the corporation and the dividend pay taxes? if not, it should employees pay taxes? the concept of the double taxation for individual taxpayers confuses me a little bit. isst: i'm not sure there
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much i can add to that. when you add the taxes up, whether corporate activity is being taxed multiple times. conservatives would say yes when you add it all up. the debate continues. host: breaker on twitter says -- he is referring to the issue of capital gains. the capital gains tax will go up 10%. host: john from new mexico. caller: thank you for taking my
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call. you read my tweet just a little while ago. i want to continue on this theme of the lower capital gains rate. this low capital gains rate is a way the uber rich use to control to give themselves their own tax rate and their own general tax category to there everything in. they can lessen their participation in our democracy. i have investments, too. to only have to pay a 15% rate on that income seems silly to me. i pay normal taxes and normal social security.
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there is no need to incentivize capital formation these days. host: are you retired? caller: i am still working. host: this is a story from "the wall street journal." host: "families with adult children." how can you take advantage if you're a couple and one spouse earns more than the other? guest: i would not want to delve into that.
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host: we will move on to jim in north carolina. go ahead, jim. caller: thank you for taking my call. the lowering to the $1 million cap. my wife and i have never made more than $60,000 a year. we have amassed about $850,000 in amassed and we have a property and we have inherited a little. we would pay 55% of the $300,000, which seems pretty exorbitant to me. the other comment i would like to make would be god only wanted 10% from the israelites. the high taxation rates seem kind of wild.
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inflation has driven everybody to the $1 million level anyway. guest: 10%, god -- it goes to the fundamental issue of the opposition of the estate tax. it strikes a chord with a lot of people. host: we have this from twitter. holly from indiana. you are on the air. caller: ok. i am a farmer from indiana. we own about 300 acres and we formed an additional 500. if we have to pay the taxes, we
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have to sell the land and we no longer have they job. if we don't have the farm land, we can make a living. if we do not farm that land, the united states will be relying on other countries for food. host: you have about 300 acres. caller: we also have our inventory. host: give people an idea how much the machinery costs. caller: the combine is about $1 million. host: how do you finance that? caller: you take out a loan.
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it will cost hundreds of thousands of dollars. you hope for a good year. this was a wobble year. you take out more loans for next year's crop. host: what do you put up for collateral? caller: your land and your assets. you might have farm buildings. host: has your family ever had to give up land or grain to pay off these loans? caller: oh, yeah. you just carry them on from year to year and so you have a
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good year. the farm income goes way up our way down. host: give us an idea of revenue from year to year. caller: let me put my husband on. does the books. revenue from a year to year. caller: it varies from negative $100,000. some years we can make $200,000. host: how are you preparing for the estate tax? caller: which is took an estate-planning lawyer. my dad is 94 years old and he owns most of the land.
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he dies, it would be protected -- would have to sell off. host: the exemption is $1 million. are you over that? caller: yes, with all the assets. host: holly and her husband. guest: this is the essence. you're talking about folks who have farms and a lot of assets that will put them over $1 million, over whenever the threshold is. they would have to start selling the land and the farm to pay that tax. there is a perception. critics of the estate tax has
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said that the vast majority of folks paying the estate tax. there is a portion of them but they are the most compelling case against the estate tax. families with billions of dollars that can more likely of ford it. host: any discussion about trying not to include or exempting land or big assets like the combine. guest: it has been more focused on the exemption level. that is what they have in mind when they write the exemption level. i have not heard anything about exempting anything specific. host: perry in mississippi, go
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ahead. caller: on the taxes, capital gains. how did people expect to get out of poverty? i worked in a furniture factory. now maybe i make middle income. around here and there is no way to get out. i learned how to invest by reading books. the money i put in the stock market i work for and i pay taxes on the money. if i'm lucky enough to pick a stock that makes money, i have to be taxes on it. if your guest can explain -- what is the number at which i'm tax opposed to warren buffett? host: what is your tax bracket? caller: it varies.
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i am a self-employed. concrete. very hard work. my wife has quit her job and works for me. we could make $80,000 one-year. the next year, $40,000. guest: if you're in a low tax bracket, you are not paying anything. that will go up to 10% and 20% if the bush-era tax cuts expire. the larger issue is poverty and benefits from the bush era tax cuts.
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that has been a big issue as inequality has become a bigger issue. the capital gains rate has come up repeatedly. it has created greater inequality. the folks at the top end of the scale end up paying less in taxes. host: we have this from our twitter page. james in d.c. caller: i'm an attorney and work in probate.
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this is a sleeper issue the journal me it has not covered. i don't think people realize the estate tax will increase. families are going to get whacked. host: hold on. d.c. has its own estate tax? caller: i am referring to the estate tax. host: ok. caller: if you die -- host: got it. host: how are you preparing your clients? caller: it depends upon the family. they have a couple of weeks. i am not taking my normal ski vacation.
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we have a lot of work to do. you have to move assets. you have to take your house and put it in a trust. 55% is a high rates. some people may have to sell real estate to pay the tax. host: give us an idea of an average client. caller: we get a line of government workers or people working in the government sector. people who work hard. they have a house. real estate is expensive. a five million-dollar house is
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not uncommon in d.c. you have half of your exemption gone. host: the state to take the house and put it in a trust. caller: you have to put that in a non revocable trust. it gets complicated. do not do this on the internet. you can make use of non revocable trust. you can make it an asset. the average person doesn't know that. host: how do you do that in two weeks? caller: you can do it. most people's major asset is
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their home. for people that have more money, it gets harder. give now. if you intended to give money to your kids, do with this year. get it out. if you wait, it is going to be harder. this gets complicated. you have an exemption. there is a current level of how much you can give to any one person. that right now is $5 million tax free this year. next year that drops to $1
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million. if you wanted to give money to your kids or give your kids and house, this is the year to do it. do not wait until next year. guest: the geographic impact. folks in high real estate markets. there has been talk about the mortgage interest deduction. on the estate tax, there is a big geographic element. farms and ranches, big deal. he is a lawyer. geographic divides are important. host: allen in texas. caller: good morning. they are going to increase the capital gains tax and already
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people are dumping stocks to avoid what may happen. in these people in the position -- another good place to put money is in housing. create another bubble like we just went through. but a house, sell it, and there is no capital gains tax. guest: there is a lot of -- i could not speak to whether there is a transfer into real estate. a lot of companies are paying out dividends right now. there is a lot of activity that seems to be going on in terms of folks dumping stocks to avoid what may happen because of the uncertainty of what happened on january 1. host: talking about dividends -- guest: they are trying to get in before the deadline. host: who are these folks? guest: the shareholders that are getting dividends.
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host: chris from arlington. caller: about the state tax code to help farmers. there is a provision that allows land placed into an easement to get an additional exemption to protect farmland from having to be sold. host: joseph schatz? guest: another element -- another thing that drives down the number of estates. that is how you get down to the 0.2%. host: this is from dedi. host: who is she talking about here? guest: probably talking about hedge funds, hedge fund managers, folks on wall street's, the top income earners. host: that is how they make
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their money. guest: they make the money on investments as opposed to salary and wages. that is the argument from a lot of democrats and liberals. it is those moneyed interests that have lobbied to keep this rate low. host: they do have a lobbying presence in d.c.? guest: i would say they always do. host: vaughn, independent caller. caller: morning. i have comments and questions. we're hearing people call and make a statement regarding their estate planning and concern for other people that work for them. you mentioned the hedge fund managers. of the other banking corporations. they are not my concern.
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my concern is people like myself who work every day. i worked as a contractor. i might have a small stock investment and small ira, a small portion of a small trust that was left from a family member.
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it is those of us that will fall at that crest. it is those of us that will fall right at the crest, when it drops down to $1 million, $1 million in property we are struggling to pay taxes for -- we are going to have to sell property to actually keep the property. host: you have to be our final word on this.
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thank you for calling in. joe schatz, thanks for helping our callers understand. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] but >> go she asian summit fiscal
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cliff. this is one half hour. -- negotiations on the fiscal cliff. this is one half-hour. our and 2:00 p.m. for legislative business. votes will be postponed until 6:30 p.m. on wednesday the house will meet at 10:00 a.m. for morning hour and noon for legislative business. on thursday the house will meet at 9:00 a.m. for legislative business. last votes of the week are expected no later than 3:00 p.m. on thursday. members are advised that thiis a change from the original house calendar. mr. speaker, the house will consider a number of bills under suspension of the rules, a complete list of which will be announced by the close of business friday. additionally the house will appoint conferees for the national defense authorizion act now that the senate has completed its work. as was announced last week, the
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house has a number of outstanding legislative items that we must resolve and first amongst them is the so-called fial cliff. though the house's targeted adjournment sein october of last year was december 14, that is no longer the case. instead members are advised that the house will now be in session the week of december 17, exact days will be announced next week. members are further reminded that the house will not adjourn the 112th congress until a credible solution to the fiscal back. mr. hoyer: i thank the gentleman for his comments. i thank him for the early notice on next friday. mr. speaker, the house is still not in order. the speaker pro tempore: the house will come to ord. mr. hoyer: i thank the speaker. first, mr. leader, if i could, we have the ending next
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thursday, so -- i want to clarify pour members so that they know. we will not be in session next friday. is that accurate? mr. cantor: mr. speaker, i'd say to the gentleman, that is correct. mr. hoyer: thank you for that information. i also want to congratulate the gentleman for providing for the week of the 17th. i know none of us want to do that but i appreciate the majority's focus on the business that has not been done. i also appreciate the gentleman's focus on the fiscal cliff and iicating thawe need to resolve that prior to leaving the 112th congress. i think those are both positive announcements. i applaud him for that. on the fiscal cli, we discussed this all the me but i want to inform the majority leader, there ae now 175 signatures, we hope to have more, and wod obviously welcome people on your side of the aisle, on the discharge
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petition for the walz bill whi mirrors the senate bill as the majority leader i'm sure knows, to assure that no individual who makes $200,000 or less in net taxable income or a family of $250,000 or less will have -- see a tax increase on january 1. hopefully we will resolve the scal cliff, but i agn ask my friend, e walz bill ll be the ru wl not ha aslip problem, obviously. and hopelly we could move that bill. again, for the purposes of giving confidence t the 98% our taxpayers whore making less than the sums put forward in the bill, $200,000, $250,000. i understand and anticipate the
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gentleman's response, that we are all concerned with growing the economy, creating jobs. we don't want to dampen that dam and we understand the gentleman's concern about small businesses, particularly those 3% of small businesses who make more than this and report it on a personal income basis. but i would hope that we could give serious consideration to trying to act sooner than the end of the year and as soon as possible, frankly, on the mid -- as we call it the middle class tax cut, the $250,000 and under and i yield to my friend to see whether or not perhaps the actions that have been taken this week have any bearinon his thoughts on whether we can schedule that bill. and i yield to my friend. mr. cantor: mr. spear, i'd say to the gentleman, i don't think it is a good thing right now to bring that bill to the floor because we hope that we can have successful negotiations with the
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white house. as the gentleman has said earlier this week, mr. speaker, that our side actually put on the table in our letter to the president some specifics. specific proposals that actually deserve a response from the white house. that's what we're looking for, mr. speaker. is are we going to get a response to our proposal about putting revenues of $800 billion on the table, putting out there a framework for spending reduction? becausi know, mr. speker, the gentleman has greed with me -- agreed with me, we've got to do something to address the spending problem. because you can't keep taxing and borrowin without doing the other side, which is take care of the problem of spending. and i think that the letter and the proposal that we nt to the president deserves a response, mr. speaker. and if we don't get a response, then perhaps the president will
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be willing to meet with us. one or the other. because it doesn't seem to me to be upholding the obligations to the american people that we're going to resolve this issue if we just, you know, stand still. we've put these specifics out on the table, the president's not responded. we asked the president to respond, mr. speaker, and i'd say to the gentleman, i hope that that's what can happen. a respond from the president, not just a summary rejection, but a specific serious response in the nature of our proposal. or if the president would agree to sit down and talk about it. that's what we've got to do to fulfill our obligation. i don't think bringing that bill to the floor, mr. speaker, is going to further that likelihood. so, with that i yield back. mr. hoyer: i thank the gentleman for his observation and he and i do share the view that we need to address both revenue de and the spending side of our budget. my view is, and i've said this
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on a regular basis, what where he really have is not necessarily a taxing problem or spending problem, we have a pay-for problem and the saxes -- actions that we take, we ought to pay for. we haven't done that through the years. frankly we haven't done it on both sides of the aisle. i don't want to get into that specific argument but the fact is if we pay for things, you don't create debt. and if you cut revenues and you cut spending, you don't create debt. if you cut revenues and don't cut spending, you create debt just as surely as if you spend money and buy things and don't pay for them. in either instance you create debt. and we need to get this country on a fiscally sustainable path. so i congratulate the gentleman -- or not the gentleman specifically but i was pleased that the -- it was -- the gentleman and i would disagree on the specificity of the offer that w included or the suggestion that was included in your letter. for instance, the president has put forward, as you know, in his
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budget and in his further proposals an extensive list of reductions in spending that he proposed. in addition he put -- has put forward very specific proposals vis-a-vis revenues. his most specific proposal, of course, has been widely debated and discussed and there was a difference of opinion on whether or not we ought to cap the taxs individuals.and under fami un there was a very robust debate on that during the campaign. the voters voted and that's a very specific proposal. in the $800 billion that you suggest in the letter, that you jointly signed with the speaker and others, there is a suggestion of $800 billion in revenues. which i probably -- which i not probably but i believe is insufficient to get us to where we need to be.
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but having said that, it is certainly of good start -- certainly a good start. but it is not a good start if all it is is conceptual. the president, as i said, has made very specific proposals. he wanttaxes on those over $250,000 to go up that. produces a certain amount of revenue. somewhere in the neighborhood of $800 billion of whh you speak. the fact is though, in your proposale don't have the specifics other than to know that you're focused on preferences or loopholes, describe them as you may, which would be a reduction. the gentleman knows the three largest of those is the health care, the mortgage interest and the pension benefits. that can be taken off your taxes. i don't know whether the gentleman suggests reducing those specifically and i don't ask him to respond to that now. but i do tell my friend that if we don't have those specific, as
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you have very specifically, i think from the president, he also recommended capping deductions at 28%. a very specific revenue-generating proposal. he's also, as i said, agreed to very substantial spending cuts which he's outlined in his budget and as the gentleman knows we've cut $1 trillion give and take some billions of dollars in expenditures pursuant to the debt limit extension of 2011. so we have addressed very substantial reductions in funding for 2011, for 2012 and for 2013. and for outyears after that. so i would urge my friend, when he says he's given specifics, as far as i know, the letter essentially has five lines it , the letter's longer than tt, but five lines of spending and/or tax cutting proposals but
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they aral all generic -- but they are all generic, not specific. and i think that is the problem we have in these negotiations, to the extent that they exist, unfortunately, you know, we're not doing as much as i think we ought to be doing. we don't have specifics. therefore there's everybody can say, well, we want to get $800 billion. president and apparently your letter agree on that. how you get there is the key. and if you don't have specifics, the president's offered specifics of how to get there, i would respectfully suggest you have not offered specifics other than we're going to deal with preference items. but they're very controversial, charitable deduction, very controversial, other deductions are controversial. we have to really get down to the knitty-gritty of, ok, how are you going to do it? and i would urge the gentleman in furtherance of what he and his party have already done to perhaps be specific in how we get the $800 billion. the president said how we get
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the $800 billion. i think that would be very lpful and i yield to my friend. mr. cantor: i thank the gentleman. that's really what discussions are for. that's what meetings are for is to try and get to specifics. and althoh he and i differ, mr. speaker, the gentleman and i differ about the specifics of our proposal and the president's proposal because frankly i know -- i think both sides know where each other are on taxes right now. certainly the president was in a different place back in he summer of 2011 when he had indicated that what was said was give us $1 trillion in adigal revenues which could be accomplished -- additional revenues which could be accomplished without tax rates is what the perfect said. so -- is what the president said. so it is different. that's what the president said this time. so we know where each other are there. it's the specifics on the spending. and the gentleman points out, mr. speaker, that the president
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has submitted budgets in the past. there's been no discussion of specifics whatsoever even when the speaker or i have suggested that in meetings that we've had as to where your specifics. it is they've just not been forthcoming. so if the president's serious to actually something about the problem, then i think we do need to come together and say to the american people we're willing to cut the wasteful spending here and in the gentman'n words, mr. speaker, to p foat we actually spend, not just keep spending what we don't have. i think it could really move the ball forward on these negotiations. so i accept the spirit in which the gentleman suggests that we should have more discussions to get the ball ming forward. just the white house doesn't seem to be willing to do so. instead we see the president going on a television interview saying he's primarily rejecting our position instead of really
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trying to get to the specifics of the problem which is reducing wasteful spending. i yield back. mr. hoyer: i thank the gentleman. i want to say two things. i want to clarify that $800 billion clearly is in your proposal. when i said the presiden agrees with that $800 billion, he agrees to get to at least $800 billion. he wants more. i agree with president we need more. when the gentleman says the problem is wasteful spending, i disagree with the gentleman very substantially on that the problem is not wasteful spending. the problem is spending. whetr it's not wasteful or not, if it's good spending, we feed to pay for it. now where the gentleman and i -- we agreed to pay for it. now where the gentleman and i disagree, when they saidhey'd reduce spending by $2 trillion therks didn't reduce spending by $2 trillion. if yu reduce revenue by $2
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trillion and you uped spending, frankly, as all i know and all of us do between 2001 and 2008 and particularly to 2006, if you do that initably you have debt. just as if you buystuff and don't pay f it, you have debt. so whether you reduce revenues or don't pay for what you buy, the result is depktly the same. debt. -- exactly the same. debt. so that's hy i say paying for it is the problem. the gentleman and i have a disagreement on whether or not you have to pay for tax cuts. you have to pay for it one way or the other. you're either going to pay for it by additional debt or by reducing programs. not wasteful spending. i'd like to get rid of all wasteful spending. i suggest the gentleman, and he knows the figures as well as i do because we've been to a lot of meetings together on this, the issue is not wasteful spending.
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it's that we decided to buy things, a lot of which i think we ought to be buying, including social security, including medicare, including investment in education, including investment in infrastructure, including investment in innovation to grow our economy which in turn will help our deficit situation as the economy grows. without raising any taxes. but the fact of the matter is i know the gentleman has historically not felt tax cuts should be paid for either by reducing it or offsetting. the president doesn't agree with the $800 billion because he doesn't think the math works. i share the president's view. the math doesn't work. the most useful effort will be if we all agree on the onive -- objective, whether it's $4 trillion, whether it's 70% debt to g.d.p. ratio which most economists or a little less
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than that is sustainable or is on a sustainable path. if we all agree with the objective and then, mr. majority leader, simply make the math work to get there on a way that we could agree on, i think america would be advantaged, the economy would be advantaged and we'd see a renaissance of job creation in this country as we did in the 2000's. and i'll be glad to yield to my friend. mr. cantor: i accept the gentleman's good intentions. i know he doesn't think that we ought to be imposing additional obligations on the american people to pay more of their money into washington if the money is not going to be spent in a way that -- that is something they would like. so if it's wasteful spending or spending just to aggravate the deficit situation. and that's from the -- you know, the perspective that we come. fix the problem. if the obsession is to raise
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taxes, you know, we don't -- you know we don't agree with that. but fix the problem so if you're asking for somebody to give more of their money into washington, at least be able to tell them that we are going to manage down the debt. that's what we're about here. which is why the focus on spending and how we have to ratchet down the spending in this town. and that's where we've heard no specifics or willingness on the part of the president to engage in discussions about specifics on spending. as far as the math is concerned, again, it was a very different president in the summer of 2011 when he said $1.2 trillion in additional revenues could be accomplished without hiking tax rates. that's what he said. so, again, all of a sudden that math doesn't work but it worked for 1.2 before. regardless, we sort of understand now, at least this round, where everyone is on
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tas. let's get to the problem and maybe then we can resolve the taxes question. i yield back. mr. hoyer: well, we have a fundamental disagreement because the gentleman continues to want to focus on spending. i think that's right that we focus on spending. but, again, debt notcaused by spending. it is caused by buying things you don't pay for. or it's caused by cutting revenues that you don't offset, either by cuts in spending, by cutting revenues. that's what causes debt. it's not buying things that causes debt. it's not paying for things. and the discipline, i wl tell my friend, in the system for the american public is if they want things, for us to say, ok, you want a tax cut or you want a strong defense, it costs money. both of them cost money. and if you're willing to pay for it, we will do that. if you're not willing to do that, we ought not to do it. that's not been or practice, unfortunately, and we dropped the pay-go requirement, as the
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gentleman knows, in 2001 and actually in 2003 legally de facto we dropped it in 2001 because we had subtax cuts without payingor them. we -- we had substanial tax cuts without paying for them. i don't think the president's changed his position. i think he said -- i think the positions have changed. mr. bowles indicated that. others have indicated that. the situation has changed. it's dynamic in the sense that it's not a situation we're confronting in 2011. but this is an important discussion because it really reques us to come to make a commonsense math decision. not an ideological decision driven by debate about spending or taxes, but on how we have a budget that is a sustainable budget for our kids and our grandkids and for our country over the long term. i think that's what this
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discussion ought to be about and if it is, i think we can get this challenge resolved and americans and america will say finally, finally those representatives we sent to washington have sat down together with one another and made sense. again, i want to say to the gentleman, i can't read it either. and you certainly can't read it from there, but you can see perhapthe five lines here and then the very long lines the president has proposed in terms of cuts and revenues. i think if you're expecting the president to come and say, well, we can get your $800 billion, this way, that way and the other way, he's not going to do that because he's not going to negotiate with himself. if you come to us and say specifically this is how we're going to get the $800 billion, we'll eliminate the charitable deduction, we are going to eliminate the mortgage
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deduction, that's something we can discuss. but if we don't have specifics on what you're going to do but just a conclusionary we're going to get $800 billion then it's hard to negotiate. we don't know what the negotiation parameters are and i yield to my friend. mr. cantor: the gentleman is saying there really is a need for discussion and that's what i'm saying today, mr. speaker. we need to sit down and discuss. we do agree on that. obviously the white house doesn't agree on that. we're trying to urge some real serious commment to resolving that on the part of the white house. i yield back. mr. hoyer: the gentleman has indicated there is other business that needs to be done. let me briefly address those. the farm bill obviously continues to be not resolved, not addressed. the senate-passed bill, as the gentleman so well knows, 64-35, 2/3 of the senate voting for it, we would be hopeful that that senate bill could be put on the floor. i talked to chairwoman stabenow and she and heranking member
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worked very hard on that. i know our committee reported out a bill 35-11, but that has not come out of the -- come to the floor. i hope the farm bill could be moved. i know i will be talking to some of my ag community today. ey're very hopeful not a stopgap but a farm bill of sufficient length, and i think they would op-ed -- i don't want to -- i think they would opt, i don't want to speak for them, for a senate bill. no crisis will spike dramatically on january 1 if we don't pass a farm bill. also, on the violence against women act, i know last week we had a sponsor in the chair -- i didn't know that. thank the gentleman for remind me, but the violence against women act has been passed by this house and by the senate. i would urge the majority to get us to conference on that rather than go through why i
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think the senate bill's a good bill and you think the house bill's a good bill, the way to resolve that is to go to conference. i urge the gentleman to go to conference on the violence against women act. i believe the president is going to come down in very short order with some preliminary numbers on the supplemental. i think i'm going to new york -- i'm going to new york tomorrow to spend time with some of our members there and seeing the devastation that's occurred. the gentleman and i know is very aware of that. we need a supplemental so we need time to do that. and it's not a very sexy issue but postal reform is again another issue we're talking about balancing. the postal department has not been able to balance its budget, as we know. part of it is dealing with the retirement programs that they're funding. but i'm wondering if the gentleman has any thoughts on
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any one of those four bills. i'll yield to my friend. mr. cantor: i'll try to be brief. on the farm bill, the gentleman is correct. we will face some very dire consequences if we don't act on the very issue prior to leaving here. part of wh i indicated last week is that is something we are focused on and know we have to deal with the issue prior to the end of the year. on the issue of vawa, as the gentleman and i knows, we can't go to the conference with a senate bill. the sflat has a blue slip problem. i am speaking with the president and his office in trying to resolve the issueses -- issues surrounding the vawa bill. i have been encouraged to see that we could very well see an reement on vawa and i'm very hopeful that comes about. but i'm encouraged about the discussions that my office is having with the vice president's office right now.
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that bill being a high priority of vice president biden. the issue of the supplemental, i imagine, mr. speaker, the gentleman has seen the press reports that i have and that the white house is anticipating sending up a $60 billion supplemental request for damage related to sandy, and i think tomorrow would be that day. at least according to press reports. the gentleman may know that the fema director testified to the house yesterday that the agency can meet its need through the spring associated with the disaster. approximately $2 billion has been delivered with about $5 billion remaining in the disaster relief fund. so, again, no one is here saying we don't want to deliver the necessary aid to the victims because that is a priority. and -- but looking forward to receiving that request and taking a look at the numbers and the need to make sure we can move forward on that as well.
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and lastly, mr. speaker, postal reform. you know, the gentleman and i have, yes, talked about this a lot. know that the issue has to do with the obligations of the postal service and how we can address those to create a more balanced prospect for the future, to allow for its continuance. so we are looking at that as well and the gentleman knows there's a lot of discussion, both bipartisan and bicameral, on that issue as well. and i yield back. mr. hoyer: i thank the gentleman. obviously we are coming here to meet, we're focused on the fiscal cliff, but there are other things that we could be hopefully resolving in the te that we have available to us between now and the end of the year and i would hope we would do that. unless the gentleman has other comments, i will be pr
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>> former congressman jack brooks died. he was remembered on the house floor. in a moment of silence honoring our colleague, the honorable jack brooks, former dean, who passed away yesterday evening at the age of 89. jack brooks was a fellow texan and a good friend who served 42 years in congress. he was leader dedicated to bettering our country and will be sorely and dealer missed by his family, friends and this congress. mr. hall: i urge one minute of silence. the speaker pro tempore: members , please rise for a moment of silence.
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>> >> it implies to me that we have
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something missing in our brain. if white americans can get by the's to "vogue", what are you telling black people? somehow, they are not good enough? they are less? that is what bothers me about a lot of the rhetoric coming from democrats and the left. we always have to make a specialness when we deal with minorities because they are too feeble minded. they cannot follow the rules like everybody else. when you treat people like the victims, i do not think they want to aspire. >> more sunday night at 8:00 on c-span's "q&a". over the next several hours, we will show you some of
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wednesday's events regarding the fiscal cliff. tax increases and spending cuts that will go into effect unless congress acts. first, a bloomberg government form. in an hour, president obama speaks to ceo's at a business roundtable. followed by a news conference with john boehner. several live events to tell you about tomorrow morning. talking about housing issues and the agency's budget. here on c-span at 10:00 eastern. on c-span two, 9:00 a.m. eastern, a news briefing at the pentagon. also, a senate commerce subcommittee on the impact of
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hurricane sandy and transportation systems in the northeast, on c-span 3 at 10:30 a.m. eastern. >> we have had these explosions of knowledge in medicine but we have not coordinated care. all of these have some in the cracks that they are as harmful as the disease is treated. you have to ask, are we hurting people overall on a global level that's what are we doing sometimes? now we have got the report saying 30% of everything we do may not be necessary in health care. when we step back, 30% of all the medications we prescribe, the procedures, this is something i think which is, for the first time, really being called out as a problem.
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>> the function -- dysfunction. the latest is, unaccountable, saturday night at 10:00 eastern on c-span two. >> members of congress from both parties said today negotiators should be able to reach an agreement to avoid the fiscal cliff at the end of the year. a forum was hosted that included house budget committee ranking member chris, and also a virginia democrat and a republican from tennessee. this is an hour. >> good morning. i'm the head of bloomberg government. thank you for joining us today, and thank you to deloitte for partnering with us in this event. when we launched bloomberg government just about two years
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ago, we had the aspiration of creating a one-stop shop, with data, tools, news, and analysis to help government affairs and government sales professionals make better and faster decisions. we went a long way toward achieving that aspiration. a big part of it is conversations on the important issues that face our nation today, particularly at the intersection of business and government. today's discussion on the
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fiscal cliff clearly meets that. we are honored to have such a thoughtful panel. senator mark warner, senator bob corker, congressman chris van hollen, governor tim pawlenty, who is currently president and ceo of the financial services roundtable. moderating our discussion today is al hunt. we always love having al over here. he really put bloomberg on the map here in d.c. yesterday it was his birthday -- happy birthday, al. [applause] i'm going to turn things over to congressman tom davis -- this is a man who really needs no introduction here in washington but has been a great friend to bgov over the years. i would be remiss if i did not give his full official title -- he is the director of federal government affairs at deloitte. please join me in welcoming congressman tom davis.
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[applause] >> thank you. and most importantly, i left congress undefeated and unindicted. on behalf of deloitte, i want to thank our all-star panel. senator corker, governor pawlenty, congressman van hollen, senator warner, for participating. and of course our all-star moderator, al hunt, giving up his birthday to be here. we appreciate that. this is hopefully the first of many events that deloitte will be partnering with bloomberg government. at deloitte, we are particularly invested in it solving the fiscal cliff. our ceo has met with the president and other ceo's to discuss the impending crisis. we even published their own study on the deficit, copies of
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which are available here today. we look forward to continuing this conversation, keeping the dialogue on going for the next month is critical if we're going to solve this problem -- and we think our panel will be very enlightening in terms of what the issues are. so, al, with that i will turn it over to you and the panel. we look forward to a productive hour. thank you very much. >> can everybody hear? i welcome you all to bgov -- if you do not know as much about it as you want, i invite you to stay, because it really is a fabulous place. we do have an all-star panel. i will start with my left, which is where bob corker says i always start. tim pawlenty, former governor of minnesota. i wrote that i thought that if
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he could get the nomination he would have been the strongest republican presidential candidate. i was absolutely right -- we just could not figure out how to get there from here. tim is now the head of the financial services round table, a job he took just about a month or two ago, and will be a huge player in washington in the coming months and years. chris van hollen -- first of all, he was redistricted and he kept 2/3 of his old district, but your margin did not go down at all. maybe a little -- one county he represents, where my son is, let's just say that they think that attila is a liberal. but he did an incredible job. chris, i would say, we are with two senators now, and i am always reminded of when bob dole in 1968 left the house to go to the senate, he said in that single act he enraged the intelligence of both bodies. bob corker is from the state that i think has produced more interesting and important politicians over the last 40 years than any other in america,
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even though it is a relatively small state. howard baker and al gore and now bob corker -- it really is an incredible testament to your state. it probably goes back to the tensions during the civil war -- east and west and all that. >> probably does. >> and mark warner, probably more than anyone, tom davis is encyclopedic on everything political, but mark warner probably more than any single figure has taken his state of virginia from a fairly reliable red states to a state that i would call almost a slight bluish purple. he left the governor's office seven years ago. he has been out of state government for seven years. he is the most popular figure in the state of virginia, and has been throughout that entire time. not only has he achieved that, as he has achieved that while he has been a member of the united states congress. that really is extraordinary. this is going to be really fun today. let me just give a quick preface. i have been in this town for 43 years. i have never seen anything like the last month. it has just been incredible. people are rallying together. it is galvanizing. it shows you what strong leadership can do. i do not think many people think you can have a strong leader who did not have roots in washington, even more given the history of this town. to have an african-american leading like this is just extraordinary. and i think rg3 deserves incredible credit for everything he has done. [laughter] and now we can talk about the fiscal cliff. let me start off just by -- we will do the house rules, except we will cut in half. 30 seconds -- then we will have time to elaborate on all this. i want to go through the panel. what do think the odds are that some kind of the deal will be
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cut by january 1 in order to avoid sequestration and all the tax hikes? mark, i will start with you. >> i think it is 80% that we will avoid sequestration. the question is, though, is this going to be a big enough deal, and will actually be enough of a down payment that it will lead to something else subsequently that will actually avoid the kind of enormous consequences of $16 trillion of debt? that percentage will be lower than the 80%. >> let's come back to the big picture -- in the short term, by january 1 -- will we avoid the cliff? >> i think it is likely that we avoid it. it does not appear that that is going so well. it is so easy for us just to do the things we need to do. i think the real line in the sand is going to be the debt ceiling. i really do think -- i have said that for a long time. i think that is when, hopefully, by that time anyway we will have real entitlement
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reform, which will bring all of this together. >> chris? >> i think it is better than 50% that we are able to get an agreement before january 1. but that is premised on a belief that our republican colleagues will recognize that the rates need to go up, as the president has said. if that does not come true, i think it is less than 50% that we have an agreement. >> tim? >> i would concur. given the consequences, i think that the odds are north of 50% that some sort of deal would be reached to avoid the fiscal
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cliff. i know it is hard to read the tea leaves because in the meantime you have these offers viewed by each side as not serious, kind of like fiscal cliff bungee jumping. people jump in and spring back out. but i believe the odds are good that there will be some sort of deal before the cliff. >> let's get into the longer- term deal -- everyone believes entitlement reform and tax reform is going to take place in 2013, maybe 2014. but just in the short term, can the republicans, can enough republicans say, we do not like it, but we are going to go along for now with the 39.6% rate and come back with a promise of next year of trying to lower and broaden the base? >> i would much prefer that we do the kind of pro-growth reform that i laid out in a bill a few weeks ago, not thinking that this bill is going to become law, but a way to show a path forward with $4.5 trillion in savings. i think that in the event that the house feels that, when they see that the senate is obviously controlled by the democratic party, you have a democratic president, you basically have the president, let's face it, not being too pejorative, that has been a one trick pony. it has been the rate is all we have been talking about, really nothing else. in the event -- i think this is what tom cole was saying this morning, in the event the house sees there is no way out, that
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ultimately you hold less of the country hostage if you do not do something -- if they do that, what does happen all of a sudden, the president has to actually do something that is a real on the entitlement side. i would say to you, i would hope that what we would do is in the interim end up with something that works for the country from the standpoint of revenues, works for republicans from the standpoint of revenues, and in that package also has the entitlement reforms that need to happen. i think we have all seen the discretionary caps are mostly bogus. we violate them nonstop. the only thing that republicans, i think even people like chris, who has been reasonable on all this, believe is real is entitlement reform. so i would hope that we would and up -- by the way, it is easier to implement the policies that need to be implemented to solve our problem then it is to create a process to negotiate and create another fiscal cliff down the road.
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i hope we will not do that. i still think there is time before the end of the year to make that happen, but again, if it does not happen, unfortunately what that does is throw us into another debt ceiling situation, which is just not good for our country. we would be so much better off starting off on january 1 with this in the rearview mirror. our economy would take off and our country would be so much better off. >> chris, you understand the politics of the house from both sides. can john boehner cut a deal without eric cantor and paul ryan? >> i have a pretty good understanding of the house, but i always am a little afraid of wandering into house republican leadership politics. just to broaden the question a little bit -- i think the question is whether or not the
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speaker is going to be able to bring a good part of his caucus with him. that or require a united leadership team. >> i am talking short-term -- the next two or three weeks. >> i think that is going to be a requirement. i think one of the decisions the speaker will have to make is whether he is prepared to put a agreement on the floor of the house that might not have a majority of the republicans in the house in support. that is one of the questions. senator corker points out that there are a number of ways you can get to a yes on this, but it is not clear if there is a way to get to yes that necessarily brings a majority of house republicans. not that we cannot get a majority vote in the house, that they apply the so called hastert rule, that you have to have half of the republicans no
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matter what before you even bring a bill to the house -- that could clearly complicate matters. people should understand there is no requirement that that be done. we can get a majority vote in the house without necessarily having half of the that can clearly complicate matters. people have to understand about a majority vote in the house. >> even though i hate to mention birthdays, it was not just the republicans. it passed without a majority. >> let me ask you. with the roundtable, if you were to go long, with restoring what kind of commitment would you give in order to do that?
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you cannot reform this in that time. >> i hope for that. i do not know if it will happen, but it is a wonderful goal. all of these wonderful ideas, the seminar, the data has been run for 20 years, so it is not a mystery. the options of what might be done have all been put on the shelf and debated for quite awhile. the question is do we have the will and inclination to do any of them? when i was the governor, we had the first shutdown in 150 years, and we had a dynamic similar to this. it was not a fiscal cliff, but it was in the legislature, and i learned some things in that moment, and one of those things was you cannot corner people so badly that they have no way out, because if you do that, in you do not leave them some face-
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saving way out, they will have no choice but to do something dramatic, and it is a very delicate situation, and there is a margin where people can miscommunicate, particular people communicate, so there is a margin of error you have to factor in. back in 2003, i had a lot of leverage. i was a newly elected governor. i had a lot of leverage. we had the upper hand in the negotiations, and i put the pedal to the metal. i won that round. however, the ill will that came from pushing to the other side was so strong that years later legislative leaders remembered how difficult that negotiation was and how unreasonable in their mind i was. we were still talking about payback six and seven years later in future negotiations. i share that -- as you think about not just this moment but the relationship between the congress and the president going forward.
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it is unclear whether there is enough republicans to support or even consider the rate increase generally, but at the very least i think they would want to see not just that question, but they would want to see what does it come with. i describe it as the two wings of the plane. people are working on one side, but not much discussion on the entitlement and structural spending reduction wing. republicans have put revenues on the table. there are lots of different ways to get revenue, including economic growth. there are other ways -- means testing on the table. if the goal is to get wealthy people to pay more. but it is unclear that the rate issue has been embraced or will be embraced by enough republicans, but it is certainly not likely to happen unless they have crystallization on the entitlement spending side of the plane, and it is not happening at the moment. you. i do not believe anyone has spent more time on this issue than you have over the last year or so.
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i do not know if you have all seen yet, but there is a marvelous study by our great economist that says 8 $4 trillion in the plan, which is what people are generally talking about, that includes about $800 billion in savings from the afghan war, includes $1.1 trillion or so of cuts that were agreed to last year. but that does not stabilize the debt to gdp ratio. it takes a $6 trillion package to do that. are we thinking too small? as you approach next year and some kind of a package? >> one of the problems, and bob and chris have been equally as involved in this as you get deeper and deeper and slowly sink in to a baseline hell,
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which can get you in a circular numbers around $4 trillion were off that 2010 base. that we keep coming back to in certain ways. so yes, the number of what it takes kids growing up, but when you count -- and bob and i could have some disagreements that we have not completely honored the discretionary cuts, but pretty much everybody agrees that you have got between $900 billion and $1.1 trillion in cuts already made. i get a little worried about the so-called accounts and how much you want to count those, whether that is washington funny money talk. but when you add interest and other things, the notion that a $4 trillion-plus deal over a 10-year frame with whatever your revenues spending cut ratio is so much smaller than what is being asked of people in every
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other industrial country in the world as a percent of government that it is almost to my mind un-american that we would not be willing to rise to this challenge, and echoing what bob has said, i fundamentally believe a real deal would do more for economic growth and more to get capital off the sidelines, not just in terms of american companies but international companies that are looking where to invest with the challenges in europe, with china going through a transition, with india's political system, as chair of the india caucus, almost more dysfunctional than ours. we look pretty darn good if we can put a real plan in place. >> what would be the size of the plan? >> i think it gets north of $4 trillion, whether it gets to $6 trillion. this goes back to where you start.
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two points -- kind of on the opening round questions. it is important to remember that the simpson-bowles plan, which has gained a lot of attention, or the gang of six, which is built off the simpson- bowles, the presumptions that went into those plans assumed that all the top rates would go back up. when you start from that, even though i think simpson-es's idea that would bring the rates down to the high 20's is ait of a stretch. i do not think we will see that kind of across the board almost zeroing out in some places of tax expenditures that would require. they can show a path towards meaningful tax reform even with the rates at the higher level. point two, and this is one of the things where i think those of us on the democratic side need to help bring some clarity -- we throw around the notion that increasing the rates to the "bush levels" would, depending on your baseline, did
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you close to $1 trillion in additional revenue and net over 10. the issue is perhaps we need to better socialize those increasing rates, the rates themselves on the income tax side only get you a little more than half a amount. the other pieces, capital gains going back up, dividend's going to ordinary rates, the estate tax not even going back to the compromise. i do worry a little bit that we need to have some clarity on this -- we use as code, we are bringing rates back up, we ought to make sure it is a $544 billion revenue increase or a $1 trillion revenue increased because what is in that buckets -- i think we need to have that more socialized. >> i am going to come back to tax reform in a minute.
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the other part of this is going to be entitlement reform. the president has proposed some entitlement changes but almost all on the provider side. they are not as big as a lot people say will be necessary. if the republicans give on taxes, will the democrats be willing to give on issues like raising the eligibility age, means testing on taxes? medicare for more affluent recipients, excluding my wife? >> let me just say that we would support a balanced approach, and it is important to point out, as senator warner did, that we have done over $1 trillion in cuts in the next 10 years which the president is committed to keeping. with respect to medicare, we do have a very different approach to dealing with medicare. there is no doubt we have to
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bring down medicare health-care cost growth. the difference is that we believe we should expand on the kind of reforms that we made in the affordable care act, where we achieved billion about $716 billion in savings, not simply by across the board provider cuts, but by changing the incentive structure, the way we pay providers so we focus on the value of care, not the volume of care. i think it is ironic that we have gone in the last four weeks from many of our republican colleagues criticizing the president for having done too much in savings on medicare, $716 billion -- their presidential candidate proposed putting that money back in, in other words adding $716 billion back into the cost of medicare, >> who was that presidential candidate? anyone remember? >> i do not want to relitigate important point, i think, which is he proposed that we put the $716 billion net cost back into medicare, which would have
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shorten the life of the trust fund by eight years. now, the president's budget, and i invite people to look at it, in the next 10-year window, if you compare it to the ryan republican budget, on medicare, more medicare savings in the 10- year window then the ryan republican budget had. it gets it in a different way. he does ask pharmaceutical companies to go back to paying the rebates they were back in 2003. he also has some reforms in medigap and other areas and a number of other things the president does there. so yes, we need to look at the long term issues. we started that in the affordable care act. we can build on those things with respect to dual-eligibles and how will we better coordinate that care. that is a very different approach than transferring rising health-care costs on to seniors, which by the way, does
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not reduce overall health-care all the data shows, if you look at the per-capita increase in medicare system, compared to the private health system, actuallymedicaid has a much lower per-capita increase. so simply moving somebody out of the medicare system into the private health care system -- it transfers some of those costs, but if you look at overall health care, where we spend 18% of gdp on health, way more than the other oecd countries, we should be finding better ways to figure out the care. >> i want to bring up tax reform, i won all of you to jump in at any time, but let me put tax reform on the table, bob. there is a sense in the town, we can do it all through tax reform. anybody who lived through the reagan tax reform, which is
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often cited, let me just give you a couple differences between then and now. then they were looking for something revenue neutral. now we talk about tax reform as raising net revenue. back then, they indeed did lower the rates. how did they lower the rates? a huge corporate tax increase. that is off the table now. how else did they lower the rates? they increased the capital gains rate to ordinary income, which many republicans and more than a few democrats say is unacceptable. and finally, they had probably without question the most politically brilliant treasury secretary and deputy we have ever seen in this country, jim baker, and people on capitol hill on the other side like bradley who were dying to work together. we do not have any of that today. we talk about tax reform as if it is a magic panacea. >> well, you saw the story today in the "new york times," and the tax policy institute, which is certainly not a right of center institution, i think it would be slightly left of center, at least center -- if you cap deductions at $50,000 it generates $750 billion over 10 years. if you do the chain cpi, which i think mark has embraced.
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>> do you include charitables in that camp? >> you can include charitables, or you can also look at the health-care exclusion, which by the way is the most massive that exists. i do not know why people in the income categories that mark and i are in and now tim with his big budget job -- i do not know. >> bob, i hate to tell you, he is in a higher category than you. >> they will publish that soon, i am sure. i do not know why we should continue to have the benefit of our health care plans coming to us in a tax-free way. there are all kinds of ways of looking at it. i do realize that to do real tax reform takes time, but i think we could go ahead and do some things. for instance, the $50,000 exclusion -- i realize that has been a non starter so far. i actually think we will end up with some machinations that
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address some of the things that mark said a minute ago. candidly, if the president got -- all he has talked about, and i think it has been damaging to the debate. because we have -- we have us and say, stand with the president, please, do this 2% -- this rate increase on the 2%, but if he got it, as mark mentioned, it is under $0.5 trillion. if you do not socialize all the other things, you have not done anything. i think again what tom cole was saying the other day -- maybe we should give it to him, because then all of a sudden there is a debate that takes place about the real things. i want to come back and say, you can easily get to $1 trillion in revenue with a four-page bill dealing with the tax peace, and again it is not something that a lot of northeastern states like, i realize, because of high state and local taxes, but you can get there. what i hope will happen is
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instead of spiking the ball the president will sit down with boehner, who i think really wants to do something -- i think both sides agree that they want to do something. i hope they will sit down and mesh something together that republicans can be ok with that generates the kind of revenues that we need, but also the kind of entitlement reforms. you keep saying -- i love you and you know that, and i love the things you state about the other senators from tennessee -- the fact is that the decisions, all the options around the entitlement reform have been discussed. we all know what they are. it is very simple to put them in legislative language, and to try to put this off just continues people are living
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through. i just do not see the need to not address their revenue peace now, but also not to go ahead and address the entitlement side. if we need to do more tax reforms down the road after we do what we are doing right now, you can go back and do exactly what you just said. do the remainder of the tax reforms in a neutral way. but you are creating a much flatter code, a broader code that does not have all the>> i can see you are dying to>> on the tax math, very little president's original proposal which, in addition to raising the rates on higher income earners has a tax reform proposal. having looked at lots of different tax reform proposals, the so-called super committee, the president's proposal is pretty clean. he says, for high income earners, we are going to reduce the value of deductions to 28%. he actually includes some things beyond the big three -- the mortgage interest and charitable, and state and local, to include high income earners, some of the things senator
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corker is saying. >> there are some similarities. >> but it is very clean. you could do this very quickly. and it does not have the negative impact of some of the ideas were you cap deductions, could totally eliminate charitable deduction. you would be taxed fully on all the money you give to charity with those proposals. the president has a clean way. out of the $1.6 trillion, it is $600 billion from tax reform and he gets $1 trillion from raisingto put in perspective, we go over the cliff, it is $5 trillion in revenue over the next 10 years compared to $1.6. senator warner has pointed out, look at the bipartisan simpson- bowles, they propose more revenue than the $1.6 trillion the president has proposed. that is embedded in their plan. less revenue than is embedded in simpson-bowles. and he has the tax reform element as well. i hope people will really take
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a is not the right approach. >> mark, and then tim. to try to keep this in perspective. i do think it is important -- let's briefly refresh. both sides share the blame on this. let's not lay out one side or the other. country, we took, depending on where you start, $4.5 trillion out of our revenue line at the same time that we double defense, created a whole new category of spending called homeland security, went to war twice totally on a credit card, created a brand new entitlement medicare part d, and we have the aging of a population that means the entitlement programs that have been wonderfully successful, those of us were willing to say we need to
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entitlement reform, not because medicare and social security have not been successful, they have been, and consequently, all we are living a lot longer, the math -- when i was a kid, 16 people were working paying for everyone retiree, now is 3 to 1, and in a decade will be 2 to 1, means we have to make adjustments. the math deniers around that i have a hard time grappling with. the simpson-bowles gang hadif we think we need to go bigger, which i do believe -- $1.6 trillion is still only 1/3 of what we had in the revenuein my memory, the american economy did pretty darn well. i do think there are ways to get there.
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to challenges around health care. one, if you go back to mr. ryan's plan and the others, most of the dramatic changes he had front of, you are the ones. most of the entitlement reforms in front of most proposals do my real problem is. referee that does not give us happened. the ryan plan does not touch medicare -- how do we bridge that? many of my republican colleagues have said, if you do real
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structural reform, even if it takes a while, you have to get some credit in. one last point on this -- there are a lot more similarities if we could get past some of the language. -- all these questions about who bears the risk. beneficiaries or providers, or some mix? we talked about building on the affordable care act notions of let's try to have the ability to make consumers better utilizers of health care. ways for them to work for the medicare population should be a common goal.
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i think there's a lot more bring down health-care costs, then we acknowledge because we have gotten caught in these terms that have ideological baggage on both sides. look at how you bring down health-care costs in a way that does not restrict the quality of care you get. we could find some common ground. >> just address what you think -- what does the business community, especially the financial community, have a stake? >> the business community is concerned about the impact of the deal not getting done and what that will have on theas the congressional budget office said, if you do not get going back over 9% in 2013 and we go back into recession. if you are hoping for economic growth and capital formation deployment, that is a huge problem.
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back to the president and congressional leaders -- ask each other in private, what can the wealthy. if the analog to that is a red cannot raise rates, you have an irreconcilable problem in the near term. then the question becomes, if lots of ways to do that. you heard some consensus around capping deductions. there are ways to do that in terms of limiting or capping of certain deductions and credits and exclusions. entitlement programs. for republicans, on the entitlement side, we will monkey with reimbursements to providers payments. all of which is good positively -- they do not fear they are going to bump up retirement ages or eligibility ages and have what they perceive to be
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real structural reforms and entitlements, even in the second 10. then he will have people saying, we are not going to do the tax deal or the revenue deal unless we see what they perceive to be real entitlement reforms. the parties have to ultimately say no, one can you live with, what is your red line, and is there overlap to put a deal together? what we are seeing now is each side -- there are a ton of ways to do tax reform. when i was governor i propose to cut the corporate tax rate in half and clear out a bunch of exemptions and inclusions. i thought i would get beat up from the left -- it was all my ceo's saying, what are you doing? the details matter. we have to get away from the
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point -- you cannot push people to a place where they cannot go. understand that and communicate and figure out where their common space is. i will end where started earlier people with no way out. otherwise you will have failure. >> i will turn to the audience -- bob? >> i wanted to respond to thei am a huge fan of paul ryan. i think the guy -- regardless of if you agree, he puts things out there and things about them. i think on entitlements it is very unfortunate the ryan budget did not do anything in the firstthat created an unfortunate set of expectations. i agree -- $27 trillion of unfunded liabilities down thewe can make changes right now to painful to seniors but painful
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to politicians. we can begin -- it begins to do the things we need to do. the best thing we can do for our country, the best thing we can do for those people struggling for jobs is to go ahead and do this now, put it in the rearview mirror. the only thing lacking is not intellect but political courage. secondly, we have to have entitlement reform that is real. this is where the money is. on the revenue case -- if you can get two people in the room, we can move beyond red lines as tim was saying and resolve this. among the mass of people on the democratic and republican side, i do not think there is that big of a difference. hot i really do not. it just takes the political courage to sit down and make the>> they make three points -- unlike rick perry, they remember them all.
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the first question, then we turn to the rest. >> right now we are facing a fiscal cliff. last year we were facing the debt ceiling. before that, we were looking at several potential government shutdowns. at a different level, the appropriations process has not worked as intended for years. neither has the budget process. it seems like abnormal is the normal. that type of activity in this situation where we are already looking ahead to the next potential showdown, as he suggested, with the next debt ceiling altercation, this creates uncertainty, which is not good for the private sector this?
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and to appropriations in a timely manner. defense contractors very concerned about sequester. warner, do simpson-bowles. everyone supports it, but no one has read it. >> and no details are provided. >> but the top line numbers are almost the same -- next time you do a default, do not make it so awful. -- that is what you have done. do a default you can live with. i agree with you that the most
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ridiculous thing taking place in the last years, particularly from some of those who say they want to not make the government jerking back and forth of potential government shutdown. nothing is more inefficient to the largest organization in the world, the federal government, and the department of defense as a subset, and stopping and starting, the amount of hundreds of millions of dollars lost each time you grind to an almost near halt of government. stop contracting, restart it -- everybody i've talked to says, give us a two-three year runway. >> going back to tim's comment -- is not good to have these red lines. it is best to figure out a way so you do not end up getting
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past this fiscal cliff by creating another one with the debt ceiling. the best way out -- we passed a bill yesterday on the floor, it passed 98-0. that does not make news. it came out of committee -- a defense authorization bill. you had a majority and minority that work together. were agreed to and voted on. and it passed. that is what we have not been doing. we have had bills come out of both leader offices, airdrop on the floor, that are intended not to pass but to show differences. if we can just go through regular order, things would be just fine. >> they have regular order in the house. >> regular order in the house has not brought compromise. i would like to see things go to regular order. i am a big proponent of allowing recognize that in the era of divided government, where
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you have one party in control of the white house and another in control of the house, you are going to have a lot of give and take. in that environment, commonplace is essential. if you go through the last an area. compromise is required. give-and-take -- people have to accept some things they do not like as part of a larger agreement. i would say getting a comprehensive agreement now that resolves many of these issues would at least reduce the constant threat of government shutdown. that is why this is so important going forward. >> i would remind everybody we have threats of government shutdown in the past -- the famous showdown with newt gingrich and clinton.
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when you have divided government, you have clashes of major philosophical difference. the key is being able to have an element of compromise as part of that process. in right now, trying to find that point. >> the best model for all of you who are working so hard on this may well be speilberg's movie about lincoln. lincoln made deals. you know what, he achieved great, great goals. it goes to the point you are making -- politicians are supposed to play politics, that is not a dirty word. >> the legendary "bloomberg view" columnist -- margaret carlson. the legendary "bloomberg viewed" columnist. >> i had this plan for a couple
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weeks -- i thought, this could happen. when you said you cannot get people in the corner as the president has with the tax increase on the wealthy -- here is the plan. on december 31, the bush tax cuts expire. after you have your champagne and your funny hats on, on january 1 at 12:01 a.m., there is a middle-class tax cut and the top rate is 39.6%, then they are cut to 37%, so republicans get their tax cut. the markets do not crash and all the dreadful things do not go into effect on january 1 because you fixed it and everybody saves face and gets what they want?
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it could be the carlson-hunt plan. >> you also get less revenue. $4 billion, $5 billion. >> they will have to give something on entitlement reform -- they will have to make that up. >> i personally believe there is going to be a resolution to the issue you are talking about before the year is over. >> the issue margaret is raising here is the one that tom cole, member from oklahoma has focused on. he recognizes that if you can get into january, it will be very difficult for republicans in the house to tell the american people that everybody's taxes are going up to provide this extra tax break on the amount of income above
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$250,000, which is exactly why tom cole said, let's not roll the dice on that issue. the question is whether -- talking about house politics now. and of members of the house republican caucus will recognize that is not a good place to be in. it is a bad place to be in policy-wise, politically, and but at least in the scenario you are talking about. half >> over here. i think somebody is coming up. >> i am with potomac research group. from what i hear -- what i hear you saying is the negotiators are probably going to use a
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baseline different from the congressional budget office. senator warner talks about getting savings from the tax break on wealthier americans. as i understand it, that is already built into the cbo baseline. how much are we talking about in terms of real savings, and how much in tax increases, and how much in terms of a redefined baseline? question no. one. and the other question is -- can you give us an idea of what it is in terms of framework we are likely to see at the end of the are we going to see a bunch of top line numbers, or are we that. if we see a bunch of top-line numbers, how long does it take and building a coalition to get it through congress? >> i would like to answer the
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second question. there is an old adage that says you do not learn a lot from the second kick in the shin from the mule. we have been down this road. we had 12 very high caliber people who work in the super committee -- who would have ever thought we would spend -- this outstanding group of people could not come up with $1.2 trillion in savings. it is almost beyond belief, is hough it not? so, for me, i just have to tell you, since i know all the decisions we have to make are not intellectually demanding, they just take political courage, i cannot agree to any process like
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it s learn -- we have hadwo dry runs. thcongre put the fiscal solvthat issue right now - at is whatneed to do count me out. >> mar do you want to take > you ise a great point. thiss whpeople's eyes say whatever you want t say, bhe notion, and this is margaret's approach a little bet -- i do think there will be a relationship between revenues and entitlements if we need to go bigger, we ed that the american people is going to buy into this notion of, ok, we will t thes taxes go up. then we go through this magical
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witching hour -- 90% disapproval goes up to 99% disapproval. that you have to get north of three -- you do this, you will get 500 in interest savings alone. they should not be as challenging as it is. one other thing -- the only thing i would disagree with bob a little, that is on the fact
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and continue to be a huge advocate of the tax reformit is a critically important piece -- you could not create a more inefficient tax code and we capital gains and medicare fraud -- thinking about cutting down the differential. i am one of the major leaders in this debate, i have been hugely efforts. they came up to me -- just do not touch the charitable or state and local taxes. i do not think we have what it means to go through a tax reform discussion when you get down to the idea that it will be the debate and end up with caps. some say, cut them all down and build them back -- in a perfect
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exercise. i do not know how we get there. >> the definition of tax reform is do not tax you, do not tax me -- tax that fellow under the tree. >> on the second piece, the danger with putting goals that would leave it to the regular order -- the regular order will not produce a result. there are two ways to deal with that -- build another fiscal puts us right back where we are, or have a default mechanism which has policy set aside that both sides do not like.
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one thing about the baseline -- under current law, if the congress packed its bags right now and went away, at the end of the 10-year period our debt to gdp ratio would be under 1%. he would definitely solve the deficit problem. >> under 1%? >> i believe. >> the percentage of your debt -- not the deficit to gdp? >> debt to gdp. now, we do not want to get there that way. go over the fiscal class. austerity -- you get $7 trillion in deficit reduction over 10 years. but you do not do it you really want to do it. when it comes to the baseline, you have to work together as part of an agreement to get to the right baseline. that does not mean it is not real world deficit-reduction. it is.
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does it mean it is better than current law? fiscal cliff, is not the best way. >> we have our baseline. deficit to gdp? >> did i say that? >> just to be clear -- if you look to the 10-year period on the current base line and get>> because you get seven years law. please read the piece on what it takes. i thank you all for being here today. one reason we have to end is these poor people will be so instrumental in getting us out of this mess that we have to get them back to work. up. >> senators, thank you,
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congressman, thank you. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> on "washington journal," tomorrow, the fiscal cliff with armstrong williams. we will also be joined by a tax writer. tax extenders. "washington journal" is live on c-span every day at 7:00 a.m. eastern. our coverage of the fiscal cliff includes speaker john boehner and minority leader nancy
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pelosi. that is coming up in a little more than 10 minutes. first, though, president obama speaks to members of the business roundtable about the economy. he told the c.e.o.'s that he would not negotiate as a precondition for raising the borrowing limit. because of technical problems, we are only able to show you part of his speech. >> we at the business roundtable are grateful to both the electricity -- for the engagement we have had with you and members of your team. listen, i know your team has really reached out significantly over the last few months to many people in this room. and i know personally from my work in the last three years on
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the export council that the outreach to us is again you in and we know you are seeking solutions that was outlined very sincerely this morning when we met with jack and the rest of the team. sense of purpose and commitment from us as we engage with you. there aren't a lot of wall flowers in here and eager for a two-way exchange nonetheless and hopefully your takeaway will be we can serve a useful purpose in the dialogue. mr. president, thank you again for joining us today. we would love to hear from you. [applause] >> good morning, everybody. it is great to see all of you. many of you had a chance to see individually or in small groups over the last several months but good to be back at the business roundtable and jim, thanks for your leadership. originally, my team had prepared some remarks. they always get nervous when i'm out there on my own and
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never know what i might say, but given the dialogue that we had the last time, i thought it was useful for me to abbreviate my remarks, speak off-the-cuff and having a conversation. let me begin by saying all of you in this room are not just business leaders, not just c.e.o.'s of your companies but economic leaders and thought leaders in this country. and i recognize that all of you have an enormous investment not only in your own companies but in the well-being of america. there are a lot of patriots in this room and people who care deeply about not only your bottom lines but also the future of this country. you have shown that over the last four years. we have gone through a difficult and economic period as we have seen in most of our life times and we have emerged not yet where we need to be, but we have
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certainly made progress. and the reason we have made progress in part is because of the outstanding management and productivity, gain s inefficiency and competitiveness achieve in each and every one of your companies. i have said it to the small groups and let me repeat it to the large group. i'm passionately rooting for your success, because if the companies in this room are doing well, then small businesses and medium-sized businesses up and down the chain are doing well. if the companies in this room are doing well, then folks get jobs, consumers get confidence and we're going to be able to compete around the world. now, the good news is that despite the extraordinary challenges that we have seen
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over the last four years, there is progress in some key sectors of our economy. we have seen housing finally but first time and that obviously has an enormous ripple effect throughout the economy. consumer confidence is as high as it's been. many of you over the last two throw h, three years have experienced record profits or near-record profits and have a lot of money where you are prepared to invest in plant, investments and hire folks. obviously, globally, the economy in europe is still soft. asia is not charging forward and some of the emerging markets are not charging forward as quickly as they were a few years ago, but what all of you recognize that everybody's looking to america. we're able to put forward a
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long-term agenda for growth and here in the united states, that increase here in the united states, it will increase globally and we can get the kind of cycle that all of us have been waiting for and want to see. what's holding us back right now is a lot of stuff that is going on in this town. and i know that many of you have come down here to try to see if there is a way to break through the log jam and go ahead and get things done and i'm here to tell you that nobody wants to get this done more than me. what we have said instead is, let's allow higher rates to go up for the top 2% and that includes all of you, yes, but not that is going to affect your spending, your lifestyles or the economy in any significant way. let's make sure that 98% of
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americans don't see a single or small businesses see a single dime in increases next year. and by doing that alone, we raise almost $1 trillion without any adverse effects on the economy. let's combine that, then, with some additional spending cuts and some long-term entitlement reform that can get us to a number close to $4 trillion, which stabilizes our debt and our deficits relative to g.d.p. for at least a decade, perhaps more. that's our plan. that's what we present. the holdup right now is that
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speaker boehner took a position, i think the day after the campaign, that said we're willing to bring in revenue, but we aren't willing to increase rates and i just explained to you why we don't think that works. we're not trying to -- we're not insisting on rates just out of spite or out of any kind of partisan bickering, but rather because we need to raise a certain amount of revenue. now we have seen some movement over the last several days amongst some republicans. i think there is a recognition that maybe they can accept some combined with serious entitlement reform and additional spending cuts and if we can get the leadership on the republican side to take that framework, to acknowledge that reality, then the numbers
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actually aren't that far apart. another way of putting this is, it's not that tough. but we need that are conceptual breakthrough that says we need to do a balanced plan, that's what's best for the american economy and that's what the american people voted for and it done. let me make one last point and i'll start taking questions. there had been reports, and these are not necessarily confirmed and maybe some of you have more insight on this than i do, perhaps as the republicans go ahead and let middle-class tax cuts extended, upper income tax goes up, otherwise we don't get a deal and next year we come back and the thinking is republicans will have more leverage because there will be and we will try to extract a stronger hand on the debt ceiling.
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i have to tell you that is a bad strategy for america, it's a bad strategy for your businesses and this is not a game that i will play. most of you were involved in discussions and watched the catastrophe that happened in august of 2011. everybody here is concerned about uncertainty. there is no uncertainty like the prospect that the united states that holds the world reserve currency potentially defaults onbut we give up the basic notion that the united states stands behind its obligations. and we can't afford to go there again. and this isn't just my opinion folks in this room. side suggesting that to resolve
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the possibility of a potential or a quarterly debt ceiling crisis, that there is a price to pay, the price is paid by the american people and your businesses and economic environment worldwide. and we should not accept going through that. john engler -- he and i philosophically don't agree on much -- [laughter] >> i'm just being honest about john, he is a great politician and comes from the other party, but john is exactly right when he says that the only thing that debt ceiling for is to destroy your credit rating. game next year.
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if congress in any way suggests that they are going to tie negotiations to debt ceiling votes and take us to the brink of default once again as part of a budget negotiation, which by the way, we have never done in year, i will not play that game. we have to break that habit before it starts. so, with that, let me just say, we have one path where we resolve it fairly quickly. we have some tough spending cuts. we reform our entitlements. we have modest revenue increases.
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you do what you do best, innovate, hire workers, make profits, do well by your shareholders and grow america next year to deal with further make america competitive, that's one option. the other option is to engage in a self-inflicted series of wounds that will potentially push us back into recession and set back this country after all the work we have done over the last four years digging ourselves out of the hole. like to make. and make sure that everybody right choice. >> house speaker john boehner and others met in the capital for 10 minutes.
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>> morning, everyone. this week, we made a good-faith offer to avert the fiscal crisis, and that offer included significant spending cuts and reforms, and it included additional revenue, and, frankly, this is a balanced approach that the president has been asking for. now we need a response from the white house. we cannot sit here and negotiate with ourselves. our targets and framework are things we can all agree on, and it is exactly how we approached our discussions in the biden group, my discussions at the group, my discussions at the

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